or a mortgage industry still floun-
dering after the housing crisis,
the concern over millennials is acute. This past
December, the real estate website Trulia reported
that “almost 40 percent of young Americans were
living with their parents, siblings or other relatives,
the largest percentage since 1940.” In picking up the
story, The Wall Street Journal observed that “the trend
runs counter to that of previous economic cycles,
when after a recession-related spike, the number of
younger Americans living with relatives declined as
the economy improved.”
With millennials bucking a well-established
trend, there has been far less demand for housing
than would have been expected by such a large
generation of young people. In fact, according to
the Harvard Joint Center for Housing Studies, even
though the under- 30 population has increased by
5 million in the past 10 years, young adults have
formed only 200,000 households in that time.
When it comes to buying homes, millennials are
collectively sitting it out. What’s the reason for this
apparent indifference? How can it be reversed?
Some observers attribute the reluctance of millennials to join the ranks of homebuyers to societal
changes. Remaining in the parental household no
longer carries the stigma it once did, and many of
today’s parents are far more accommodating than
those of previous generations.
Immersed in a digital environment from birth,
millennials care more about owning a smartphone
than a home. They appear committed to mobile
lifestyles and the freedom to take advantage of
educational, travel and job opportunities world-
wide — a freedom that might be compromised by
ownership of a large, static asset tethering them to
a specific location. Underlying all these behavioral
trends, however, is a solid economic rationale.
Millennials have had to contend with an economy
with fewer jobs and lagging wages. The employment
market is becoming increasingly divided between
the high-skilled and low-skilled, with the middle
class dwindling in between. The best way to increase
wages and graduate to the ranks of the highly skilled
is through further education, but this usually adds to
the substantial student-loan debt already accumulated by many in this generation.
Millennials also must constantly reassess skills
and job security. The pace of technological change
and free trade threatens stability in many industries
and regions. Homeownership depends on the possession of a solid middle-class job for the long term.
The current housing market itself can be a discouraging prospect to a millennial homebuyer.
Home prices hit record highs at the end of 2016 and
are only expected to increase, with the inventory
of single-family homes for sale remaining tight in
many cities across the country.
According to the Winter 2017 edition of the
Housing and Mortgage Market Report (HaMMR)
published by Arch MI, U.S. home affordability is
actually one-third better than it was 10 years ago,
but home prices are still rising faster than incomes,
especially in those markets with solid employment
opportunities. Moreover, interest rates are expected
to rise, adding to mortgage costs.
Apart from economics, the complexity of buying a
home also remains a significant barrier. The homebuying process has always intimidated anxious
borrowers, with its formidable array of paperwork,
approvals and confusing terminology.
The mortgage process is particularly unattractive to millennials, who value informality and
authenticity, have a “cut to the chase” mentality,
like their information delivered in simple bite-size
nuggets that speak to their immediate concerns,
and prefer online transactions that personalize
the process and prioritize their individuality.
They’re also highly responsive to “Influencers,” defined as “people like me” whose stories, testimonials
and real-life encounters with a given issue or life
decision resonate with this generation.
In addition, new regulations and restrictions
intended to protect consumers and enhance transparency have resulted in stricter underwriting
guidelines. For millennials, often burdened with
student debt and managing on starter incomes,
it can be difficult to qualify for conventional loans.
Even when applying for loans through the more
lenient first-time homebuyer programs, they
find it stressful to realistically evaluate their own
economic circumstances and practice the self-discipline necessary to improve their credit scores
and amass a downpayment.
Overall, millennials are effectively shut out from
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