Homeownership: a ‘dream deferred’ for millennial generation


For previous generations of Americans, homeownership was seen as one of the final rites of passage into adulthood and financial independence.

Despite the Great Recession and the subsequent housing crash, more than 85 percent of the millennial generation — that is, those born between 1980 and 2000 — still believe that owning a home makes more financial sense than renting.

But according to a new paper co-written by a University of Illinois expert in household and individual financial behaviors, millennials still face significant hurdles in their quest for homeownership.

Millennials are often associated with their embrace of the sharing economy and a preference for splurging on the latest electronic gizmo rather than on big-ticket items.

However, the general public has the wrong perception about their attitude toward owning property, said Yilan Xu (“E-Lan SHE”), a professor of agricultural and consumer economics at Illinois.

In the paper, Xu and her co-authors examined the factors that affect housing demand of the millennial generation. They draw three conclusions:

  • Mortgage accessibility is a key constraint to homeownership for millennials.
  • The burden of student loan debt among millennials impedes their transition from renters to homeowners.
  • Millennials are taking a longer time to settle down, so family events related to home purchases — such as marriage and having children — are being pushed back.

As a result of the Great Recession, millennials who were underemployed may not have enough money for the initial down payment necessary for a mortgage.

Or they may have a low credit rating, which often translates into a higher interest rate on a home loan or completely disqualifies them as a borrower, Xu said.

With millennials getting married and having children later in life, there’s also no incentive for them to move from a bachelor pad to the suburbs.

But the biggest factor impeding their transition to homeownership is student loan debt, Xu said.

The silver lining: Student-loan holders are more likely to simply delay buying a home rather than giving up on homeownership altogether.

It’s a finding that should give policymakers pause, since homeownership is associated with a number of good outcomes, Xu said.

Xu noted that homeownership has been promoted in the past through the commercial credit expansion through the government-sponsored lenders Fannie Mae and Freddie Mac.

Then, of course, the housing market crashed in September 2008.

The paper is published in the Family and Consumer Sciences Research Journal.

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Citation: Xu Y, et al. (2016). Homeownership among Millennials: The Deferred American Dream? Family and Consumer Sciences Research Journal, 44: 201. DOI: 10.1111/fcsr.12136.
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