The number of homes sold in metro Phoenix is low by “normal” standards. It’s the same in most of the United States.
One of the reasons for the relatively low number of home sales is that the Millennial generation (about 18-33 years old) hasn’t started buying homes yet, at least not like their parents did when they were the same age.
Why aren’t Millennials buying homes?
- Student loans
- The slow economy in recent years hit younger people who were just getting established economically very hard.
- Millennials are delaying marriage and marriage has a big impact on home buying.
Student Loan Debt
The graph below gives you a good idea of the magnitude of the first problem, student loan debt.
For those 25 to 44 who did end up buying a home, student loan debt was by far the #1 thing that delayed them in saving up their downpayment.
Student loans were a bigger problem than credit card debt or car loans in pulling together the downpayment. That certainly would not have been the case for their parents at the same stage in their lives.
The student loan problem isn’t going away.
Employment is growing slowly and it’s growing most for Millennials.
The slow economy problem is definitely improving for Millennials.
Is it delayed marriage or a renunciation of marriage?
If Millennials are delaying marriage because they don’t have the money, then their marriage rates will rise strongly with their economic fortunes.
If, on the other hand, Millennials just aren’t that into marriage, then their marriage rates – and their home purchasing rates – won’t improve as much as expected as the Millennials gain economic strength.
If Millennials are cool to marriage, it means cooler home sales going forward.
The delayed marriage problem will improve but we may be seeing a permanent change with lower marriage rates and lower homeownership rates in the future.
What happens to Millennials economically and socially has a large impact on Millennial home buying, of course, but it also has important impacts on home sales (and therefore, home prices) for buyers and sellers of all ages.
Millennial home buying rates will increase but because of high student loan debt and low marriage rates their ultimate home ownership rates will probably end up being less than their parents’ rates were at similar stages in their parents’ lives. That would mean weaker demand for home ownership and stronger demand for rental homes.
Now, if you have any insights into why Millennials aren’t buying homes like their parents did, please leave a comment below.