As the majority of the consumer market becomes saturated with younger generations, the economic climate and trends of the previous decades start to fade. This is certainly the case for the real estate market where younger generations are getting a late start to home buying. With the primary group of potential home buyers falling into the ages of 25 to 34, studies show there is a dip in the homeownership rate for these millennials when compared to their predecessors.
A 2018 report highlights the decrease experienced in home buying for this group of young adults falling 8 points lower than that of those who came before in the Gen X segment. There are many reasons contributing to this fact that are generational but also there are those based on the current climate of the housing industry. Increases in home values have grown since the 2008 recession in both highly popular urban areas and up and coming suburbs; which is reported to be up 70% nationally when comparing the median price of homes during the recession lows against what the current market rate is in 2019. This increase in home values has put would be buyers in a position unable to make the financial commitment required and has pushed many out of the market all together.
For the generational impacts, potential buyers in these younger demographics are seeing significant changes in their personal and financial patterns. Two major impacts of home ownership center around marriage and starting a family which for this group has been happening at a later age. Also, there is more debt tied to this segment with educational costs increasing financial challenges that do not support making home investments. Additionally, as the real estate market as a whole has been increasing in value while slowing down housing development the buyers’ environment is growing more competitive. This has pushed many individuals considered to be at the age for making home ownership a reality to seek alternative options.
According to Texas-based property developer and owner of Western Rim Properties Marcus Hiles, “Gen Xers are staying in the rental market longer than expected as millennial home ownership rates have fallen at a faster rate than that of any other age group.” The stats highlight this with 65% of households run by those under the age of 35 renting compared to a decade ago where the rate sat around the 57% range. Subsequently, property developers have had to adapt to serve the needs of this growing group of renters by increasing development efforts around the key locations these demographics reside.
With the financial challenges and limited housing availability making home ownership out of reach for most younger generations, alternatives such as renting will continue to become a popular option. Building out new avenues for this growing group of what would previously be considered home buyers will help to aid the changing generational trends. However, it may be that purchasing a home comes later in life now for future generations but until the housing market levels home ownership rates will continue to fall.