Millennials, those born between 1983 and 2003, are putting their white-picket-fence dreams on hold as increasingly mobile lifestyles and strict mortgage requirements combine with still-fresh memories of the housing crisis.
According to the Census Bureau, the number of homeowners younger than 35 dropped by nearly a million from 2000 to 2010.
The ideas of ever-rising house prices and homes as a stepping-stone to financial stability are no longer the selling points for young adults that they were for previous generations.
“They are hearing all these horror stories about people who bought a house and now their mortgage is more than what their house is worth,” said Evan Segal, author of “From Local to Global” and a former business executive whose company worked closely with the housing sector.
Many older millennials — now entering prime home-buying age — look at homes as riskier investments and are weighed down by heightened requirements to qualify for home mortgages.
Bryan Hall, 26, who has rented since his sophomore year of college, said he hasn’t had time to build up a good credit score and that has prevented him qualifying for a low mortgage rate under today’s tightened standards.
Aside from little time to build credit, millennials in the current economy also face minimal job security, an all-time-high student-debt load and the prospect of hefty down payments, particularly under the stricter underwriting standards that emerged after the housing crisis.
Colorado’s 2010 college graduates who exited with student debt owed an average of $22,017. The unemployment rate for 20- to 24-year-olds was 12.9 percent in May, according to the Bureau of Labor Statistics. The rate drops by half for those 25 and older.
“The poor economy has pushed many into the rental market,” so they are ultimately postponing home-buying, said John Covert, director of Metrostudy, a market research company.
“Extremely smart”Despite the hurdles, some millennials are tiptoeing into the housing market.
Michelle Ackerman, a real estate broker for Redfin in metro Denver, said about 30 percent of her customers are millennials, who are particularly well-informed about the housing market and have researched the sellers and their properties thoroughly.
“They are extremely smart about how they buy,” she said.
Ackerman said that in many cases, her millennial clients borrow money from their parents to meet the 20 percent down-payment requirement, leave the market for a year to save up, or look at more modest options.
“I think that what they are looking for has changed,” she said. “They are looking at smaller homes where the common living space is not as important and access to public transit is a very important requirement.”
Ackerman said many of her millennial customers are single and will either buy a house and rent out part of it or will buy a house with a roommate.
Covert said renting millennials now face a situation where rents are higher, mortgage rates are at record lows and new homes are more affordable.
“When you look at how prices have come down, and if they do have good credit and they have saved, then they are in a good place to buy a house,” Covert said.
Lifestyle factorsBut even that may not persuade many millennials to take the plunge. Segal said in many cases the lifestyle of millennials prevents them from buying.
“Things are pushed out a little bit,” he said. “They (millennials) are tending not to get married until later on. They are looking at their 20s as a period of self-discovery.”
In Hall’s case, he said that although he wishes he could own a home, having to juggle four jobs — three as a cook and another as a pet courier — puts the idea out of reach.
“If you like the place you live and you have job security, then it starts making sense,” Segal said.
Hall agreed, noting that he wants a more stable professional life before buying.
“That is the focus of our generation; we are mobile, and we are transient,” he said. “We don’t have a deeper connection with where we grew up or the community we live in.”
For millennials looking at the housing market, things may not be stacked against them for long. Ackerman said she has seen some easing on mortgage requirements and believes standards will stabilize between current levels and pre-recession prerequisites.
“What this recent recession has taught us is not everyone should own a house,” Covert said.
Michelle Zayed: 303-954-1720 or mzayed@denverpost.com
