By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.
Ten years ago, the homeownership rate among young adults under age 35 was 43.6%, according to Census data. Today, the rate stands at just over 36%.
But while some homeownership critics have tried to say in recent years it’s because young people don’t value ownership as much as they do experience and freedom, the underlying economics tell a much different story.
It’s not that America’s young adults don’t want to buy homes. Instead, there are a number of factors at play: fewer jobs (or jobs that pay enough to afford a home), delayed marriage, higher debt, and poor credit scores.
Eric Belsky, managing director of Harvard’s Joint Center of Housing Studies, told a crowd at the National Association of Realtors’ conference in Washington, D.C., last week, “There really are serious issues in the first-time buyer market.”
Belsky estimates that nearly 3 million more young adults live with their parents today compared with 2007, before the Great Recession kicked into gear. This no doubt points to underlying problems with debt, the job market, and increasing housing costs in many areas.
The average college graduate is already carrying a large debt load as soon as he steps off campus. Student debts collectively add up to $1.1 trillion. And the Federal Reserve Bank of New York says student loan default rates climbed to nearly 12% last year (up from 6% in 2003).
Of course, millions of young adults are already affected by these numbers. But what happens to the housing market when first-time buyers become more and more delayed by circumstance? At some point, many markets may start to feel the missing buyers just as much. For instance, who buys the empty nesters’ homes when they’re ready to retire and downsize? Who do the move-up buyers sell to when they outgrow their starter homes?
It’s an issue that eventually impacts each stage of the housing chain. We haven’t seen a lot of solutions being laid out – other than a few initiatives that aim to curb student debt or give those in some professions relief.
We’ll be watching this area closely to see what new data impact home buying and selling.