NEW YORK (MainStreet) – Economic reality has changed Millennials' approach to housing. Now the housing market is going to have to change its approach to them.

According to Washington, D.C.-based nonprofit Generation Opportunity, the unemployment rate for 18- to 29-year-olds hit 9.8% in March. The effective unemployment rate, including those who just started looking for jobs, is closer to 14%. The Federal Reserve Bank of New York noted in February that student loan debt has climbed to $1.16 trillion, with more than one in 10 student loans (11.3%) past due.

As for their approach to the housing market, it's a crawl at best. According to Principal Financial Group, Millennials are already putting 65% of their budget toward housing — with just 38% owning their own homes. Roughly 7% are still getting help with the rent from their parents.

“Their approach is more conservative,” says Mike Schenk, senior economist at Credit Union National Association. “They've much more cautious than people were pre-crisis, and I think a big reason for that is their parents: They learned from some of the mistakes that their parents made.”

Overall, Millennials have fundamentally shifted the prevailing view of the housing market. Jeff Taylor, managing partner of independent mortgage processor Digital Risk, notes that the combination of their parents' experience and their own current debt burden — which includes an average $33,050 in student loan debt for the Class of 2015 — has made them wary of investing in homes.

“Our parents looked at their homes as their nest eggs, where you worked, you paid it off and that was your savings,” Taylor says. “There's also the reality that they've seen so many of their friends, family and parents get absolutely turned upside down by the housing crisis that they don't look at the the house as a nest egg, but just as a place to live.”

The current economic picture hasn't done much to change that view. While the median household income grew 0.3% last year to nearly $52,000, that's still 8% lower than pre-recession 2007 and, adjusted for inflation, are hovering at the same levels they were in 1996. In fact, with inflation accounted for, American households were actually making more in 1989. According to Taylor, that's driven Millennials toward rentals even in cases where a mortgage would cost less.

“It's housing for the moment,” he says. "Until they get more comfortable in a job or family situation, they're not going to be ready to buy.”

When they do take the plunge and try to buy a house, they're especially cautious and particularly distrustful of banks. CUNA notes that last year credit unions grew their membership by 3%. Of those roughly 3 million members, about two-thirds were Millennials. While Schenk says that his credit unions are a bit more flexible in their underwriting than banks and avoided the mortgages that gave banks fits during the housing crisis, he says Millennials have been choosing credit unions for mortgages largely because they're looking at the bigger picture.

“Part of the reason is that credit unions have a long history of approaching not just the homebuying decision, but financing decisions generally, in a collaborative and consultative way,” he says. “That consultative process and that approach to the individual not as a mortgage borrower, per se, but as an individual that has a broad array of financial needs with the mortgage decision as part of that context is a big deal.”

They're also proving especially patient. Taylor says that many of the homebuilders his company works with have taken to building in urban areas at higher prices to meet Millennials' needs. Many don't drive or own cars and, as Taylor points out, they're willing to trade a bigger house at a lower price for a smaller place with restaurants, shopping and other amenities nearby.

“Right now, it feels like they really want to be downtown,” he says. “I'm born-and-raised from Miami and for the first 35 years of my life, Downtown Miami was just an area that nobody lived in and was dead by 5 p.m. In the last five or six years, it's been amazing the buildings that have gone up there, and it's the Millennials moving in.”

And there are going to be more of them, if projections hold up. Schenk notes that the credit unions' baseline forecast has unemployment down to 4.8% by 2016. Schenk says that will help wages increase beyond the rate of inflation and push more millennials into the jobs they were trained to do. They may also get a boost from Washington as the Federal Reserve begins increasing interest rates.

“One of the things that is going to push Millennials off the fence is Fed action, which we anticipate coming sooner rather than later,” Schenk says. “We believe that a lot of folks have sat on the sideline waiting for rates to go down further, but we believe the Federal Reserve will act by the middle of this year.

That's great for Millennials and urban areas, but it may come at a cost for the suburbs. With Millennials increasingly embracing urban life, Taylor says homebuilders are going to have to throw in a whole lot of perks to draw them to the same suburbs their parents fled to a generation before.

They want their homes very technologically advanced, with iPads on the wall that control the lighting, and that comes with new construction,” he says. “Those are the turnkey-style smart houses that builders are trying to build to lure Millennials to the suburbs, because they're going to need more bang for the buck.”

— Written by Jason Notte in Portland, Ore., for MainStreet

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This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.