The Millennials have taken a lot of heat lately, criticized for poor work ethics, overdependence on technology and general lack of interest in notching up the traditional milestones of “adult” life. Now, as home sales continue to drop, market watchers are looking once again to the attitudes and behaviors of Millennials for explanations.
Millennials – those born between about 190 and 2000 – do account for 76 percent of first time homebuyers. But since as a group they’re postponing home buying and other major life decisions, their numbers aren’t doing much to change the overall slump in first time home purchases.
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But according to new statistics reported by Real Estate Consulting, these young people aren’t saying “no” to home purchases as much as “not now.” And their reasons for doing so reflect not the much publicized slacker mindset, but a cautious one inspired by their parents’ struggle with tough economic times.
That wariness to commit to a long-term financial obligation combined with a changing social climate contributes to some of the stereotypes about Millennials’ preference for renting and budgeting for different needs than home buying. And because Millennials now make up the largest demographic group in the United States, second only to the famous Baby Boomers, investors in rental real estate may want to take a closer look at their reasons for doing so.
As just about everyone knows, one pressing problem for Millenials is the much publicized student loan debt. That burden, along with Millennials’ equally well-publicized struggles in the traditional workplace, creates the stereotype of the young college graduate forced to live at home with Mom and Dad while working at a low wage job.
But as Real Estate Consulting reports, that’s not the whole picture. In a culture where life spans are longer than ever and 60 is the new 40, Millennials are postponing all those so-called adult decisions to later points in their lives. They’re marrying later, and having children later too – if they have them at all. Jobs may take them to different places, so settling down can wait a while.
Behind some of those decisions is a very real fear of an uncertain future. Many in this generation have seen their parents and grandparents struggle through the last recession, with lost jobs, low wages, and an economic crash triggered by – what else? – the collapse of the housing market.
So it may not be too surprising that many Millennials see a house not as an investment or a step toward a more secure future, but as a millstone. Buy a home? What if you find a job in another city? What if a future spouse doesn’t like living there? What if you lose your job and can’t find another one to pay the mortgage? And what if you want to travel?
If fear is a factor driving the Millennial aversion to home buying, another, and potentially more important, one is simply shifting priorities. The world in which this generation came of age is simply a different one than that of their parents – not just financially, but culturally.
Not all Millennials are cash strapped and debt-burdened. They may have the ability to save for a down payment or manage a mortgage, but they’re choosing to put it toward other things such as technology and entertainment services. And they’re questioning the value of house payments when the same amount will cover a rental with amenities like pools, gyms and good location.
A good location too, means easy access to restaurants, shopping and work. Millennials as a group buy fewer cars than previous generations, partly because of debt, but also out of choice, so living close to those amenities is a major factor in choosing a place to live.
All these sometimes contradictory characteristics paint a picture of a generation that sees the world through a different lens than their parents do: cautiously optimistic, but also keenly aware that things can crash at any time. They may not reject the traditional model of adulthood outright, but they’re certainly taking it with a grain of salt.
That’s why Millennials can have such an impact on the world of real estate in general and home sales in particular. And for investors, understanding that impact and the reasons behind it can open doors for new opportunities to build wealth in rental real estate – as Jason Hartman advises. (Featured image: Flickr/Wonderlane)
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