Millennials and Student Debt

I have been reading a lot of articles about millennials and their issues.  Specifically, I think about those issues that impact their ability or interest in buying apartments.

What Did I Find?

Recently, a lot of conflicting articles.  Are millennials having trouble buying?  Are they stepping up their purchases?  The WSJ seems to be writing some of the dark articles.  First, that student debt may be keeping millennials from buying.   Or, as a related issue- that not only do they want to buy houses, but they can’t save for them!  Ouch!

houses a little out of reach?

Or that Millennials, despite being 45% of the first-time homebuyer pool, are struggling with bidding wars and unaffordability!  Boo!

And yet- here’s an article talking about starter homes being the next hot market.  Sizzle!

And across the country, there are other posts showing that millennials are “finally” buying homes, just delaying those purchases for a few years.  Conformity!

Or, my favorite housing search website, Zillow- or Streeteasy, doing a buy vs rent calculator, helping millennials figure out what they can afford.  Math!

In All Seriousness

What are my takeaways from this?  It seems that the affordability issues are real not only for millenials, but for all buyers.  Sure, people are delaying home formation, marriage, kids, too.  And this may be because of student debt, or may just be a new reality.  I suspect that any or all of these have played a role:

  • a recession
  • lower wage growth
  • lower growth in general
  • delay of marriage and kids
  • baby boomers living longer
  • baby boomers competing for the same urban apartments with millennials
  • millennials spending too much of their discretionary income on food and experiences and not saving enough
  • increased costs of health care
  • millennials’ wanting to live in urban centers (and therefore not the suburbs)
  • millennials’ moving jobs more frequently, and therefore being more cautious about committing to a city or region

waiting in line for locavore delights? no problem. saving for a home purchase? maybe tougher.

All of these plays a role as factors keeping millennials from buying.   And yet, it does seem inevitable that millenials will of course revert to the behaviors of generations’ past.  They will not remain renters forever, they will not all be able to stay in the city forever, many will get married and have kids.

In the meantime, it seems quite clear that home ownership may not reach the level that had been reached before the 2008 recession.  And that structural change is something to keep an eye on.  I do not believe that the National Association of Realtors, which I would consider a reliable beacon of housing optimism, to be as reliable about statistics- in the sense that they want to paint a rosy picture, on millennial purchases, or about the housing market in general.

I think that investors in rental housing will see outsized returns in secondary and tertiary markets across the US, though that will play out over the next one or two decades.  It may be harder to see in the short term, though I can’t predict with 100% accuracy that we’ll continue to see stories about millennials and their buying habits.  I guarantee that.  

Related stories I think would be interesting to read:

  • Parents more actively helping Millennials buy homes- definitely a trend moving in that direction.
  • Adult children buying for their parents, or parents who move back in with their kids, when they find that they can’t retire.  A different take on the mother-in-law apartment.  Is this a thing yet?  Seems like it will be.
  • Millennials who don’t want cooperatives because they “aren’t cool”
  • How Millennials react to city apartment buildings that are becoming Naturally Occurring Retirement Communities (NORC’s)

I’m not sure that we’ll come to any grand conclusions, but it’s definitely worth trying to think about these trends and how they will impact your investments in real estate.

Have a great June! -Scott


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