Millennials aren’t purchasing homes on the same timelines as previous generations, and that has some economists worried. The homeownership rate for millennials was 37 percent in 2015, which is about eight percentage points lower than Generation X and baby boomers when they were at the same age between 25 to 34, according to a new report released by the Urban Institute.
Economists point to several factors for millennials’ delay into homeownership, including their delays to get married (being married increases probability of owning a home by 18 percentage points), rising student debt, delayed child bearing, and increasing rents that are making it more difficult to save for a down payment.
But the Urban Institute’s report notes that such delays into ownership are sparking concern. Less educated young adults are falling further behind in homeownership, the report notes. The gap in homeownership rates between the more educated versus the less educated population has grown significantly, increasing from 3.3 percent to 9.7 percent between 1990 and 2015. “Less educated millennials could be falling behind homeownership because of their unstable incomes and rising rents,” the report notes.
Further, if millennial homeownership remains sluggish, there could be even greater wealth disparities among white, black, and Hispanic millennials. Across ethnicities, millennials have seen a drop in homeownership since 2005, but black homeownership rates are consistently lower. “As minorities are less likely to be homeowners and have less wealth, intergenerational transfer of homeownership provides an additional explanation for the persistent disparities in homeownership across race and ethnic groups,” the report notes.
Urban Institute researchers call for efforts to boost the financial knowledge of young adults about homeownership, including greater financial education in high schools that talk about homeownership and down payment assistance programs. Also, they’re calling for an expansion in credit assessment criteria of borrower applicants. The Urban Institute says that rental, telecom, and utility payment history should be used by lenders in evaluating millennials’ creditworthiness.