When it Comes to Home-Ownership, Millennials could be "Generation R"

A whole generation of young Americans seem to havernadopted a set of priorities quite different from those of their elders.  Millennials or Generation Y, those Americansrnborn between the early 1980’s and the early 2000s are putting education, atrnleast temporarily, ahead of major life events such as marriage andrnhomeownership.  Sam Khater, CoreLogic’srnDeputy Chief Economist, says that the Great Recession figures into thisrnequation as well.</p

In an article written for CoreLogic’s Insights blog, Khater notes that therngeneration’s emphasis on education is having a big impact on homeownershiprnrates which, for Millennials stands at 37.9 percent.  This is nearly 14 percentage points below thernrate for Baby Boomers (born between 1946 and 1964) at about the same lifernstage.</p

He points out that marriage often drives the desirernto own a home and each successive generation is marrying later. Twenty-sixrnpercent of Millennials between the ages of 18 to 32 were married when surveyedrnin 2013, down from 36 percent of Generation X (born in the years betweenrnBoomers and Millennials) and 48 percent of Boomers at the same age.</p

While Millennials have put marriage on hold theyrnhave increasingly focused on higher education and 34 percent of the cohort withinrnthat generation aged 25 to 32 had a bachelor’s degree in 2013 compared to 24rnpercent of Baby Boomers at a comparable age. rn</p

As higher education is supposed to be an investment in future earning powerrnKhater says that a more educated generation should have an improved ability tornbecome homeowners in the long term.  ‘However,rnin the short term, they will carry higher debt loads, and those with less thanrna bachelor’s degree are facing stiffer economic headwinds.'</p

A recent Pew Research Center study looked at household incomes by generation,rnanalyzing the real median incomes of 25- to 32-year-old households in each ofrnthe three generations four years after each went through a recession.  The Millennial generation’s median income wasrn$57,200 in 2013, compared to $54,100 for Generation X, and $54,800 for Baby Boomers.  But when those incomes were segmented by bothrngeneration and educational attainment Millennials with a bachelor’s degree hadrna median of $89,100, 3 percent higher than Generation X ($86,300) and 16rnpercent higher than Baby Boomers ($76,800).  Millennials appear to be doing well relativernto the previous generations.  </p

But that does not hold true for those with less education.  Millennials with some college attendance had incomesrn6 percent lower than Generation X and 12 percent lower than the Baby Boomers.  With only a high school degree Millennialsrnearned 12 percent less than Generation X and 19 percent less than Baby Boomers.rnWhile income inequality has increased for the country as a whole, there is morernincome inequality among Millennials than prior generations.</p

These three factors, delaying marriage, focusing on education, and lowerrnincome levels for those who have not gone to college has slowed the rate of Millennials’rnhousehold formation. In 2012, 36 percent of Millennials were living with theirrnparents, the highest share in at least four decades. </p

Khater says the delayed household formation and time spent on education arernputting Millennials’ labor and balance sheet profiles on lower trajectoriesrnthan earlier generations.  FederalrnReserve research indicates that they are less likely to be in the work forcernand have half the net worth of Gen X and Boomers at the same age.  This is due to student loan debt as well asrnlower incomes for those who didn’t go to college.  Thirty-seven percent of households under age   40 had student debt in 2013, the highestrnnumber on record.  Student debt is alsornassociated with higher levels of non-student debt because students tend tornfinance living expenses while in school as well.  </p

The Great Recession severely impacted Millennials but Khater says they werernon a fundamentally different trajectory than their predecessors even before, particularlyrnin terms of education, debt, and income. “The cascading impact of Millennials’rnchanging economic impact is hampering their ability to achieve homeownership,rnwhich puts an increased emphasis on entry level affordable homeownership, suchrnas condominiums. Unlike their predecessors, only a minority of Millennials arernhomeowners, so perhaps a more apt nickname for this cohort is GenerationrnRenter, or Generation R,” Khater says.

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