As people have hit 30, suddenly they wanted to buy their own home. That has been a building block of the U.S. economy for over a half century. But that idea now is under attack as - just maybe - Millennials are turning their back on home ownership.
Note the "maybe." Research is all over the place on this topic. One number smacks you in the face, however. According to the U.S. Census Bureau, homeownership among those 35 and under is 34.2%. That compares to 63.5% across all age groups. It is down from 39% for the 35 and under cohort in 2010. And it is down from rates in the low 40s in the early part of this century for that same age group. That is a dramatic and abrupt drop.
Understand, too, Millennials range from 16 to 36 years of age and, obviously, the younger half just are too young for most to seriously contemplate homeownership. It's the older third that ought to have plunged into home buying. What's up?
There's enough data to raise worrisome questions for those who depend upon predictable real estate markets. Chew on this finding in San Francisco for instance: according to a study by ApartmentList.com, four in five Baghdad by the Bay Millennials have "given up" on buying a home.
A counterpoint is that the same study found 76% want to buy a home someplace, sometime, just not in San Francisco and not now. Partly the explanation is that the Millennials can do math, sort of. Those who said they quit thinking about buying a San Francisco home said the downpayment was a problem, and they estimated that at $70,000. A San Francisco Chronicle writer shrugged: "In reality, they need over $142,000. So if they thought they couldn't afford a house then, they definitely realize they can't afford one now."
You get the point. Where Millennials are they maybe cannot afford to buy and, frankly, many of the cities that are hottest with Millennials - San Francisco, New York, Austin, Los Angeles, Boston - are also torrid real estate markets.
Research out of UBS also notes that large numbers of Millennials live at home and the older ones are encumbered with heavy student debt. Said UBS: "This economic backdrop has implications as it appears to be influencing certain spending decisions such as when to purchase a home for the first time."
Emeka Oguh, who runs PeopleJoy in Philadelphia, an employee benefits company, agreed: the large amounts of student debt Millennials are dealing with have slowed homeownership, he said.
Some 69% of college graduates have debt, which totals on average $28,950 -- an amount big enough to impact ability to borrow for a mortgage and also the ability to repay a mortgage. A typical monthly repayment amount is around $300 (exact amounts vary enormously, because interest rates do). Repayment takes 10 to 15 years.
Does that knock Millennials out of ownership contention?
Before deciding whether Millennials want to be Generation renter, listen to Luke Orlando, a 22-year-old finance major on track to graduate imminently from the University of Texas in Austin. Orlando said he has constructed spreadsheets and about this time next year he will be buying his own home in Houston, where he starts work also about now. He said: "Millennials are not a monolith. I have actively saved for home ownership, and according to the budget and amortization tables I've constructed, I will be able to purchase my first home just a year after I begin working. For some Millennials, the traditional American Dream is alive and well."
Count Orlando as the voice of a majority of Millennials, at least in terms of generational desires. That's underlined by a poll out of the National Association of Realtors that said 94% of renters 34 years of age and younger want to own a home in the future.
Keep sorting through the data, and the bottomline is that - very probably - many Millennials in fact do want to buy. But between constrained job prospects, debt loads, and fiercely high home prices in ideal cities, they just can't.
Will they eventually? Right there is a key bet for real estate investors and, right now, it looks like a genuine "pick-'em" bet.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.