January 2, 2018
Here we are in 2018 already, and millennials’ entry into young adulthood has come at a time in which the housing environment has shifted dramatically following the bust. Sluggish income growth, tighter mortgage credit, little for-sale inventory and rapid rent gains have altered the housing arrangements. While renting longer than their predecessors, most millennials’ report still wanting to own a home one day, and Orion’s brokers are seeing this shift.
When we look at finances, almost half of households under the age of 35 have some educational debt. Also, changes in labor market opportunities are playing a role in Millennials waiting longer to move out of their parents’ house. The financial crisis exacerbated the trend and made it harder for young adults to afford to support themselves independently, contributing to millennials staying at home longer or moving in with roommates.
Also, a contributor, our brokers have seen a sharp decline in marriage among young adults has driven broad changes in living arrangements. A larger share of young adults is living with their parents, but also with other relatives, roommates and partners. Seventy-two percent of first-time buyers last year were couples.
More recently, housing affordability has further hindered today’s young adults from living on their own. Tepid wage growth that has not kept pace with rising housing costs in the most recent expansion means that, even with a tighter labor market, millennials are still finding it difficult to afford living on their own.
The transition to homeownership continues to face several hurdles. Most immediately, a lack of starter homes on the market has limited buying opportunities and driven prices up faster than incomes. Orion’s brokers that this problem is acute.
Some relief may be in sight. Not only has wage growth strengthened over the past few years, but apartment rent growth has begun to soften. As millennials age into higher-paid, more secure jobs and settle down with partners, they are also gaining the financial resources to support independent households more easily. The largest subset of millennials will reach their early 30s over the next five years, the age where homeownership historically sees a big jump. Orion hopes there are homes for them to buy!