Why Millennials Are Having Trouble Buying Homes

Mortgage and Lending NMLS#247664 BRE#01266511

There are many reasons why the millennial generation – young adults in their 20s and early 30s – are either having trouble buying a home or have decided to delay their purchase. Recent troubles in home purchasing have left many millennials feeling discouraged and wondering if they will ever become homeowners. Many experts are also worried about the lack of homes being purchased by millennials, because the housing market is fairly dependent on young first-time homebuyers.

The census bureau has reported that only about 36 percent of Americans below the age of 35 have become homeowners. Despite the fact that this number is so low, at least 90 percent of millennials would rather buy a house than continue to rent. If the percentage of millennials that would prefer to own their own home is so high, then why is the percentage of actual homeowners so low?

Why millennials are not buying

One major factor is the trickle down of expensive college educations. As the price of college continues to rise, more students are forced to take on the load of student debt. Millennials rack up student loans throughout their college career, not realizing that it will one day affect their ability to purchase a home. This is especially sad because the mortgage on an average priced home is cheaper than renting an apartment in most cases.

While student loans provide recent graduates with the advantage of establishing their credit history, they can hurt them when it comes time to apply for a home loan. Lenders consider an applicant’s debt to income ratio as part of the loan application. A hefty student loan can greatly hurt what the bank views as an ability to make payments on a mortgage.

This is particularly true for someone that has private student loans, because private loans tend to have higher interest rates and shorter payment terms, meaning that their monthly payment is much higher than that of someone who only has government student loans. Another problem that people run into is multiple student loan payments. If you are making five $70 dollar payments to separate lenders as opposed to one $150 dollar payment to one lender, you weaken your ability to prove that you can afford to take on a mortgage payment.

If that is not enough to worry about, there is still the fact that you have to save for a down payment. Many millennials barely have a savings account, much less a 20 percent down payment. Those who do decide to buy will rely on their parents and other family members to help with the expense of their down payment.

Another reason why millennials are having trouble buying homes deals with the job market. The country is finally making its way out of one of the biggest recessions we have seen in a long time, and finding a job can still be difficult for some people, especially for those who are new to the job market and lack experience. While a college degree can help get one in the door, it still does not warrant the pay level that many millennials need in order to cover their student loans and a mortgage.

It might take a little time, but, hopefully, we will start to see more millennials buying homes sometime in the near future. If you have trouble buying a home and would like credit counseling and loan information, contactMaureen Martin.


Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Shelby DiBiase 09/11/2014 09:18 AM
  2. Will Nesbitt 09/23/2014 01:00 AM
  3. Winston Heverly 05/11/2015 12:44 PM
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Bill Reddington
Re/max By The Sea - Destin, FL
Destin Florida Real Estate

Think the student loan issue will not go away. The crap economy is certainly a factor. Yes some degrees have a better chance of getting jobs. But with up to 20% of real unemployment figures it is going to be interesting.

Sep 11, 2014 01:39 PM #77
Dan Derito
Success! Real Estate - Brockton, MA

Here in Massachusetts we have too many young folks going to colleges who are paying the exorbitant salaries of part time professors.  They come out of these factories without a chance of getting a meaningful job.  It's what they have been told that they need to do all of there lives.  At the same time, it's difficult to find a reliable HVAC contractor, electrician or other tradesman to get repairs done.  These young people need to learn a skill and pay down this useless debt so that they have options, like home ownership.  It's not about blame.  

Sep 11, 2014 01:48 PM #78
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Interested buyers from all age groups are interested in home ownership in the Dallas area. MIPs are often a factor for buyers who are unable to put down 20%. 

Sep 11, 2014 04:58 PM #79
Janelle Ancillotti
Seneca Home Staging - Syracuse, NY
HSR Certified Home Stager, Syracuse, NY

Another reason why millennials have trouble borrowing is their thin credit history. Just this morning, our local news channel 9WSYR had a report by Rick Reagan in his feature series "Money in Your Pocket" that said 67% of millennials do not have a credit card. Building good credit history is so important if you want to borrow money whether it is a mortgage, a car loan, or other financing. Millennials would be wise to open a credit card, keep their balance below 30% of the available credit, and make payments on time in order to build good credit history.

Sep 11, 2014 10:16 PM #80

I know a lot of realtors ( and apparently mortgage brokers too ) still assume that a 20 percent down payment is still the norm. Besides FHA, VA and USDA loans there are lots of lenders and some banks offering a lot less than 20% down programs. I think most people, millennials to boomers, are still not completely sure the days of economic and employment uncertainty are gone yet, so they are cautious in making major financial commitments.

Sep 11, 2014 11:53 PM #81
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

A college education is so much more than preparing for a job, it's preparing for a life. Learning HOW to learn is valuable regardless of the subject. Advanced degrees, like a law degree, MBA, Science, Medical, are only available after the undergrad..that's where one's subject matter makes a difference. 

With 5 kids, we've done all the various ways of financing a college degrees. Two of my kids have had basically a full ride...one based on grades and the other solely on community service. One is financed. One is working her way through school....and is starting her 6th year of college. 

The grants and scholarships are available for almost any kind of achievement...this is where the kids and the parents should apply themselves. I think the crushing debt is another factor of the entitlement generation and the parents who have created it. Work hard in high school..make a difference or get great grades. Then you are entitled to a free ride....but the move to cancel debts and the whining about the cost....just another thing tax payers should pay for? Nope...not everyone can afford an higher education and if they choose to, then suck it up and pay for it. 

Sep 12, 2014 01:44 AM #82
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

Some good comments here. For those who recognize Millenials don't want the same thing their parents/grandparents want, you are correct. For those who recognize Millenials took out money for college when the cost far exceeds their earning ability, you are correct.  Even trying to navigate paying off the loans is a challenge deserving of someone with an accounting/finance degree. 

There are many obstacles. I can speak first hand as can some other posters because I have Millenial who left and came back. There are not enough jobs on Wall Street to pay for the college expenses Millenials incur. What does this point to,,,,, income inequality. It will continue to dog our economy and especially middle class.

Sep 12, 2014 02:48 AM #83
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

One last thought about student loan debt. All of us should pay attention to and encourage Congress to change/improve student loans. I'm not talking about debt forgiveness here. Student loans should be easy to interpret. Students should KNOW what the consequences are. Students should be readily be able to track their loans and payments with up to date information. Transferring student debt to a new lender should be more disciplined and transparent. These lenders need to understand Millenials are online souls not waiting at their mailbox for transfer letters.  And the government should not be making bundles off student loans. 

Sep 12, 2014 02:57 AM #84
Michael Ford
San Diego, CA

Karen Fiddler, 82, your advice is well proven and many would be wise to reread the tactics you used and see their way fwd. 

choosing a college is no different than buying a car or a house...find one you can afford.    and if it takes you six years to do so without taking on debt then so be it.   for those who see college as an entitlement...sorry, it's not.  for those who seek degrees in obscure or arcane subjects areas...be prepared to suffer through a career of likely satisfying , but low paying work.  it's the nature of some fields that  the jobs are few and pay poorly.   if someone decides to make that their path...they have done so with eyes open

Sep 12, 2014 03:24 AM #85
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

All of your reasons are valid. I will add another one--many young professional singles don't want the maintanence issues involved with a house and want to be able to move fast if another job opportunity comes up.  They don't want to be 'tied down'  to a mortgage.

Sep 12, 2014 02:01 PM #86
Paddy Deighan JD PhD
TimeshareLawyers.pro - Vail, CO
Paddy Deighan J.D. Ph.D

HAH I thought that many do not buy homes becaue they like to live with Mom and Dad or because they cannot find jobs!!

Sep 13, 2014 05:55 PM #87
Kristin Hamilton CA Realtor
Sun Lakes Realty - Banning, CA
(909) 557-6966- Specialize 55+ Communties Banning

Some college graduates cannot find jobs but this is a nationwide program. I am sure some get degrees in odd fields but many take Business, Computer Science, English and Pre-Med/Law. Unless they grads go on to get their Masters & Ph.D., they will have a hard time finding jobs but it does show they have devoted their lives for the past 4 years to get through college. I am pretty sure these college kids had high hopes for a job and many colleges do help them find jobs from employers before the day of graduation. Sadly our economy is bad and employers are laying off due to the medical insurance programs so we need to get our ducks in a row and our college kids employed. Until this happens many will not be able to afford to buy a home. I am sure they want to buy instead of living with parents but must save first and pay down their loans. 

Sep 14, 2014 12:26 PM #88
Mark R. Hardy
Short Sales, REO, New Builds, First Time Buyer - Mesa, AZ
Short Sale Specialist Realtor - Mesa AZ

Yeah the lack of jobs and salary increases are really hurting our economy especially millenials that I work with.  If people don't start to get raises as interest rates rise, we are headed for a housing crisis again.  Not necessarily in that people will get foreclosed on but that there will be no buyers out there, homes will sit on the market, builders will build but buyers won't come, etc. That's my biggest fear in the economy right now as we all know interest rates are already increasing but I haven't heard that salaries are, have you?

Sep 18, 2014 07:49 AM #89
Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

These are valid points, and yet... I am selling regularly to millenials, who manage to pay down college loans, save money for a house, manage their credit, etc.

Sep 20, 2014 10:39 PM #90
John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!

This valid but with that said, I have had a very busy summer with both buyers and sellers in their 20s and early 30s.  I feel they will be lifetime real estate clients now. 

Sep 23, 2014 01:04 AM #91
Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate www.ChandlerRealEstate.weebly.com - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Maureen, you are spot on with why millennials are having trouble buying homes. College debt, low paying jobs, no credit history, no substantial work history, no previous rent history, the list can go on and on. I would imagine there are not too many millennials buying until they are at least 30 or older.

Sep 23, 2014 02:21 AM #92
Winston Heverly
Winston Realty, Inc. - Atlantis, FL

This was a wonderful read, glad I came across it in the archives. Thanks for sharing.

Mar 31, 2015 03:23 PM #93
Winston Heverly
Winston Realty, Inc. - Atlantis, FL

This was a wonderful read, glad I came across it in the archives. Thanks for sharing.

Mar 31, 2015 03:24 PM #94
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

Great discussion & clearly one that realtors need to learn from given these young people ultimately will be our customers

Apr 01, 2015 12:34 AM #95
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

 Millennials, generally described as 18-to-34-year-olds, have moved past Generation X to become the largest generation in the American workforce, so eventually they will build up the credit and collect enough for a down-payment. They are going to buy their own place.

Sep 24, 2015 04:46 PM #96
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