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.”