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For Millennials, The Homeownership Dream Is Dying
We’ve talked quite a bit lately about homeownership rates in America. To recap, this month marks the 20-year anniversary of Bill Clinton’s 100-point National Homeownership Strategy which sought to raise homeownership rates in America to record levels — and it did. Unfortunately, the foundation upon which this miracle was built began to crack in mid-2007 and by the summer of 2008, the two entities which had for years underwritten the American Dream were in receivership.
After the crisis, PE swooped in to snap up foreclosed properties and more recently, the largest firms have set about loaning money to home flippers and aspiring landlords. Meanwhile, the housing collapse turned a nation of owners into a nation of renters and demand for rentals has of course driven up rents, making it more difficult for prospective home buyers to save enough for a down payment.
All of this is cast against a subpar (or perhaps “non-existent” is the better term) economic recovery wherein weak demand has curtailed spending and investment, leading directly to lackluster wage growth. This of course, makes it still more difficult for would-be buyers to make a down payment and indeed it says quite a bit about the state of the economy when homeownership rates continue to hit multi-decade lows even as Fannie and Freddie are now backing loans with down payments as low as 3% while FHA has cut premiums at the same time.
If you’re a millennial, the situation is even more desperate. As we’ve documented extensively, new graduates are having a difficult time finding jobs that are commensurate with their education. College degrees have become so commonplace that they have largely ceased to differentiate candidates from one another and on top of that, many young job seekers are discovering that their $35,000 educations did not provide them with the skills sets employers are looking for. Speaking of $35,000 educations, student loan debt is perhaps the biggest impediment to homeownership for young Americans.
Combine a 14% U-6 unemployment rate for 18-29 year olds with soaring rents and a housing market that’s pricing out young adults in many of the nation’s most desirable locales and you have the recipe for historically low homeownership rates for millenials. A new study by The Urban Institute has more on homeownership by age group:
For 30- to 34-year-olds ... homeownership rose from 26 percent in 1940 to 56 percent in 1960 and continued climbing to 61 percent in 1980. The homeownership rate for adults in their early 30s then declined to 53 percent in the 1980s, grew by 1 percentage point between 1980 and 2007, and plummeted to 44 percent in 2013. Given the parallel decline in homeownership for 25- to 29-year-olds, it is unclear whether working-age Americans will ever regain 1980’s peak homeownership rate.
Though the economy is solidly recovering, the mortgage credit regime remains unresolved and credit tight. The millennial generation is now ages 20 to 35, still mostly at the beginning of their delayed transition into headship and homeownership. It is a diverse generation racially and by national origin.
Millennials also have very large inequalities in income, educational backgrounds, and access to resources from parents and grandparents. These uncertainties and disparities make it difficult to project with certainty how millennials will transition into housing markets.
The report goes on to project declining homeownership rates for working age adults all the way through 2030...
...and the trends are consistent across borrowers…
The Urban Institute offers some explanations for the above which should sound quite familiar to regular readers:
Why will the overall homeownership rate continue to fall in 2020 and 2030? Possible contributors include the following:
Hispanics and blacks have lower homeownership rates than whites, and both groups are growing as shares of the population. But changes in racial/ethnic and age composition alone do not account for the drop in the homeownership rate..
Real wages have been very flat since 1996, and have actually declined among adults ages 25–34. This stagnation makes it much harder for people at any age, particularly the young, to save enough for down payments. Even for young adults with good jobs, low vacancy rates and high rents make it more difficult to save.
Student loan debt has increased from about $300 billion in 2003 to over $1.3 trillion in 2014.
In sum, a combination of demographics, flat wage growth, and student debt are conspiring to impede homeownership for young adults.
Lower homeownership rates create demand for rentals which in turn drives up the cost of renting, squeezing household balance sheets further and making it still more difficult to afford a down payment, which leads to still more demand for rentals, still higher rents, and so on and so forth.
With tuition rising and the US economy stalling out (adjustments for "residual seasonality" notwithstanding), it's not entirely clear how these trends will reverse themselves over the medium-term and indeed, if the projections shown above are any indication, this situation is likely to persist for decades to come.
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Long basement 'Millennial Suites!'
My best friend's ex-wife makes $75/hr on the laptop. She has been unemployed for eight months but last month her income with big fat bonus was over $15000 just working on the laptop for a few hours. Read more on this site..... www.Earnmore9.com
I earned $20K last month renting my HOA's pool for rave parties. I would have made more, but half of them jumped the fence to get in.
I didn't know home ownership rates were even that high prior to WWII. I think we're going to break below those levels. Back then, owning your own house/property was something you aspired to. Now nobody even wants to own a home, even if they could afford it (which fewer and fewer people can anyway).
I should also mention that taxes prior to the "New Deal" were a shit-ton lower than they are today. Not just in absolute numbers (obviously), but in percentages as well.
http://www.census.gov/hhes/www/housing/census/historic/owner.html
Welcome to "Rent a life", where the corporate world & big government is pushing everyone into a rent to never own world... To increase tax revenues and consumer debt...
http://galeinnes.blogspot.com/2015/06/rent-life.html
Next Stop: Open Air Prisons...
Taxes, college, healthcare and housing eat the entire paycheck. They ate ate most of it 25 years ago and since then have inflated annually at rates several times faster than inflation in wages. Increasing amounts of consumer debt have filled the void, but that game is long in the tooth.
Druckenmiller was right when he said that what has really going on is generational theft as the old have sucked down the fruits of the economy at the expense of the young.
More like the finance economy has absorbed all of the productivity gains of the last 30 years. Think of a leech that weighs as much as you sucking on your back.
This is the sole purpose of government.
yep, it was me with the -1.
Government is what we make of it. We suck, and thus #@.gov sucks too.
But that is not the sole purpose of government. Even by nature of the descriptor, it is to govern. A guide, with real consequences.
Not to spy, steal, and marginalize others.
No consequences = present environment
Can they get Section 8 vouchers? Spread the cheer.
Heh. I just heard someone on Bloomberg make the exact opposite point as this article. Time will tell.
Prices will return to their historical ratio against income, perhaps lower, and the segment will buy. House prices are a function of wages and it can only be manipulated for so long.
What if 80 years of exported petro-$ inflation suddenly comes home to roost? I am hearing of Chinamen paying cash for houses here in CA.
At some point, all those dollars need to find a home.
It won't matter. It won't be enough. Housing is not a financial asset. People must live in them or the asset is pointless. And in order to live in them, the person must pay into it a commensurate rate on the mortgage, or the rent by proxy. If this condition is not met, it must be sold.
The only reason things are where they are now is because still a large portion of the population bought at a ratio of income / price that was much lower. Once those people die and age out it will be absolutely unsustainable. A certain crash.
But Chinese buyers are buying the visa, the school, the laundering, the escape from toxic air AND the house. So naturally they are willing to pay more. This is a massive market distortion squeezing out the residents who only get the house.
One of the biggest capital flights in history
heh
so im a millenial and work corporate jobs..
im looking for a new job and ive only had 2 or 3 companies reach out to me that were for direct hire positions with benefits..the rest were contracts with no benefits and only a year long at the most
i would never buy a house unless i was in a business that was stationary or actually owned it
or they became affordable again without taking out tons of debt
So apparently tens of billions of interest only loans are coming due and not too many are expecting the principle to be paid.
Sounds to me like a lot of houses about to spill on the market for next to nothing again.
The sooner the better. I'm a millenial and looking for a decent life where I can fuck bitches for a few years and then eventually have some beautiful white children with one of them to help maintain civilization. I'd like a house to be able to do that in, and raise the brats properly of course.
Let the boomers who haven't saved a damn dime rot in nursing homes as they age and die. I don't care. I saved more by the time I was 22 than most of them have at 55.
Of course I'm just as well off leaving the cunt-ry.
The one good thing to come out of this is that half of millenials are learning about finance, politics, and the system, while the other half are just as blind as 90% of boomers and Gen-X are/were. I see that as a good thing. We're learning. This other half are lost in the sauce, and always will be. Let them rot in apartments alongside their beloved diversity neighbors.
Yeah dude, id say its more than half. Maybe 25% of us are "awake"...the rest are in places like Austin, Texas and New York City chasing their dreams of being musicians, artists and generally just are dead beat loser fuckers.
Who cares? The bankers are the only ting that matters other than the illegals....
Unless you are born into it or marry into it attaining wealth in America today is a very low percentage proposition.
In California the flippers are the responsible party for putting real estate out of reach. My kids will be looking elsewhere to raise a family. Arizona and Texas still offer the dream.
Get used to the idea of dying millenials, cause that is what the fabian socialists that took over have in store for you.
I am a millenial and I have never had a dream of owning a home.
I'm just outside the millenial years depending on where you set the barriers. I supported the household when my wife went to school (above the 50th percentile of household income) so she didn't have to take out too many loans. She supported the household while I went to school (above the 50th percentile again). Despite what we'd been able to save over those roughly 10 years we still don't have a down payment despite living frugally. There simply isn't any affordable property in any of the 4 major metropolitan areas we've lived in.
But we'll have some dry powder and impeccable credit if the market ever corrects.
The boomers are getting old and will start keeling over. Probably in considerable numbers before 2030. When they go, they will leave houses and retirement money to the Milennials. As boomers age, they will be selling homes and moving into retirement complexes or nursing homes. This should pressure prices, unless the banks can get enough immigrants and Chinese buyers.
Ha, ha ,ha. Boomers leaving retirement money.
More like leaving the first and second refi they used to buy a 1968 Camaro. Maybe the $800 a month payments on the RV they thought they would use. Boomers are going to leave behind assets nobody will want and things millenials won't be able to sell.
The greediest generation isn't leaving jack shit to the next generation.
Well that's not exactly true. They are leaving us with a world buried in 100 feet of excrement and trillions of dollars in debt.
Why should the boomers leave their kids anything. It's their money, go out and earn your own. I've got a couple of bucks in the bank and did physical work for almost 50 years to get it and working an extra on average 700 hours of overtime every year. My kids have been working since they were old enough to get paper routes and they don't whine like you losers who expect something for nothing. My parents were drunks from the greatest generation and all they left were bills. In one sentence you insinuate, as many do, that boomers are broke yet in the next whine about all the the money they have and your not going to get any. Your just pissed off, like so many others like you, that the boomers did the tough love thing and cut you off after paying your way through life for over 20 years. Your parents cut you off because your an ungrateful lazy piece of crap and it's time to earn your place in the world.
One of the reasons millenials are despised is because for all your claimed intelligence, which you love to brag about, you don't show it. You like to brag about how great you are and the great things your going to do but never do them. No generation had a vote on the government spending beyond it's means or going to war to support the corporations. If the worlds a mess blame the 1%ers who hold the purse strings and meglomaniacs like John McCain or Lindsay Graham who think the US should rule the world and then send our precious sons and daugters to die or get maimed for it. You like to blame the "dumb" voters who send the clowns to the statehouses and DC, but who selects the candidates? The parties and the rich. You blame the people least likely to vote, the poor, for voting for clowns that will give them things. If they do vote it's because one of the parties went around to the churches and paid bribes to get the minister or priest to get his flock to the polls and to vote for them. No generation got to vote on sending their jobs overseas, it started long before the boomers entered the workforce, nor did they get a vote on the CEO buying a company plane for his mostly personal use nor did they get to vote on the big bonuses the board gave him for doing a crappy job so that when he is on the boards of the companies his board members run he can vote in favor of large bonuses for them for doing crappy work as they all send our jobs overseas.
You like to whine about there are no jobs. There are plenty of jobs and more coming. Unfortunately for you wimpy break out in a cold sweat when physical work is mentioned, they are work for a living jobs. While you expect to retire at 35 most of the farmers are in their 70's and 80's and still working, but not for long, but no one is lining up to replace them. They need thousands of truck drivers but no one wants to drive even though the money and equipment are decent. Our local papers are filled with jobs but they never seem to get filled because they are blue collar jobs. You like to talk about the job opportunities the boomers had when they were young, like heavy dirty life shortening work in factories, foundries, coal mines, and steel mills or farming knee deep in cow crap and never able to take a day off, but you won't do them even if they are still available, and many are. If you drive truck today you get a nice rig with power steering, air conditioing, GPS, multilane highways, nice to incredible sleepers, on road breakdown assistance, loads that you don't have to load and unload yourself, none of which was available back then. But you need an office so you can stand around the water cooler talking sports or texting friends or facebooking or bitching about your boss trying to get you to work more than the 2 hours a day you manage to find the time to do with your social life taking up most of your work day. Your "educated" and you should be paid for bringing your brilliant personality and exceptional intelligence to the office. Extra pay is required to do any actual work, even more if they want it done right.
And here we see an example of entitled old fart who has no idea how the world goes around since 1970´s. Thanks for borrowing loads and loads of money for younger generations to pay.
Be patient millenials, the bubble will pop and the collapse will come. It will be better to be young than to be old and dependent on the government.
yes but what will happen to my savings i managed to stash after a few years in FOREX?
I am scared that after 6 years of no interest waiting for the crash the final insult will be when the crash causes a bank run and I lose it all!
Would someone explain to me how owing a $200,000 debt for 30-40 years is "Owning a home"
Am I missing something here. It appears many find it acceptable to pay $600, 000 dollars for a $250,000 dollar particle board McMansion that cost maybe $50,000 to build.
Is this what those poor abused millennials really want or need?
Owner: the person recognized by the law as having the ultimate control over, and right to use, property as long as the law permits and no agreement or covenant limits his or her rights.
All you out there paying a mortgage, paying insurance, paying taxes, fined by the HOA for your grass being 1/2 inch too high... Does that description fit you?
We really need to stop bullshitting each other.
Nobody owns a home anymore even if you have the title. If you don't pay your property taxes see what happens to what you thought you owned. You might own the building but you won't be able to live in it because your town or state will claim they own the land.
I thought the entire purpose of buying property meant that it is yours. Everything runs on the iTunes philosophy. You may have paid for it, but whoever sold it to you will always reserve the right to take it back.
I jumped in here because the end of comments was not working.
I have a house that is all brick in good shape 1800 Sqft that I will sell for 80k. There are many hundreds that can afford the costs of buying on a fifteen year morgage, and many of those could do it on ten. The utilities are new as of three years ago and the roof is the first thing to go at another 8-12 years. How can this be beyond the reach of most "folks"? The mortgage costs are less than rent going down to a seven year payout.
It has a pretty good 2.5 car garage too. The problem is that there are so many deadbeats that will not learn to budget and do the least effort to save.
The lowlifes cannot seem to be able to save anything outside of their owings to the payday loan folks. If I could beat them into saving for their own good they would be out of their problems in a few months.
I hate everybody.
They should wait until after the revolution to buy anyhow.
Will Versailles come on the market again?
If you are under 40 and have to find a new job, you're screwed. Unless you got very lucky you probably didn't get a home early enough to gain a significant amount of equity. Even with a good job you'll be priced out of almost everywhere worth living.
I moved for a job and got a good offer. After one year the employee contribution of the family health insurance premium jumped from $650 a month to $1550. The plan was changed from a PPO to a HMO plan with no out of network coverage and a $6000 deductible. CVS minute clinics and all the local urgent care facilities were dropped so I would be forced to see nothing but high cost and low care doctors.
So I don't have health insurance for my family.
The average home costs $340k in the vicinity of where I work and the surrounding area looks like the garbage parts of West Virginia. But instead of crappy 1100sg ft Bi-levels built in the 1970s going for under $100k people are sking $300k. The amenities of the town are ZERO. It is a fucking joke. There is a town nearby overrun by Mexican drug cartels and people are still asking $150k+ for homes. REALLY, $150k for a ghetto home???
I did the math and I would need to net $6000 a month just to afford a shit house. If I want health insurance and a house I'd need $8k a month. You are talking about a $120k a year job. For living in what I would consider a lower class area. Compared to where I moved from the place looks like Appalachia and it is three times more expensive.
So I'm renting a crappy ranch that hasn't been updates since 1965.
I don't really understand how people are making it when you need an upper 5% job to have any hope of living a lower middle class lifestyle. Most of the people I have met either have no kids or both parents work. One will have a $60k job and the other will have a $30k. Between the two of them they can squeak by. Most people I talk to have interest only loans. The idea is to live in the house long enough for it to appreciate in value enough that when they sell it, there will be enough for a down payment on a different house.
What an insane strategy. Banking on the greater fool.
I had a great house in a great community. It was affordable to live on the salary I received. But thanks to the "recovery" the company I worked for went out of business. There wasn't another company near me I could work for so In had to move. I even got $20k more a year at the new job. Didn't realize it would be $20k to low to have a chance at living like a pauper.
The thing is if wages kept up with inflation the average middle class job would be paying $100k a year. Executive level jobs sure kept up and in fact far outpaced inflation. What used to be a $120k executive job is now a $350k job.
Almost every job I see posted in my career path pays $60-80k. Sure if you want to move to San Francisco you can make $140k. But that is like making $30k in other places.
Working in the United States isn't worth it unless you have a top 1% job. I don't think 100 million people can find one of a million available jobs that pay that kind of money.
Exactly!!
Im in the 60-70k range and im living at home in my parents basement for the time being, eating for free and saving.
There is no way anyone is living a middle class life unless they are making "C-level" money.
What's even more funny is that the jobs in this price range don't pay fuck-all and the job requirements are that of 3-4 people. they want you to do everything
I don't see my future looking too bright and I am considering giving up my US citizenship and going elsewhere.
I have nothing holding my down here other than my motorycles and quite frankly, as much as I love to ride I don't want to get hurt and get raped by Obongocare.
You've got it wrong. You think you should get paid for just showing up and get rapidly promoted for doing so, the boss wants you to do an actual days work and will not promote you or give more money until your actually worth it. Keep bitching about having to actually earn the money they pay and then demand more time for facebooking, texting friends, or shopping during work hours and you'll get your wish as you'll have plenty of free time after they can your ass and replace you with an H1B.
Hey man, FUCK YOU.
I don't use social media and I work damn hard.
I can keep working hard and it's still not enough to beat inflation. So fuck off
I guess Obongocare means you can stay on your folks insurance and live in their basement.
That would not have been possible pre obongo and may not be if the jokers in the supreme court throw it out.
I just gave you a refutation of your "situation". The house that I have to sell is a pretty good house if you can do with an 1800 sq ft all brick ranch bunglehole with all HVAC and such new in the past three years. (The roving spic gangs stripped all before because the neighbors couldn't be bothered to report that activity.
It is not a bad neighborhood other than being mixed race. There is low crime if any would bother to call the cops when criminals are working . My gentrified neighborhood is potentially far worse. I have lived in mixed race neighborhoods for the past forty years. We white coons and the black coons do maintain a decent 'hood if given a chance. The colored folks had most of their assetts tied up in their houses and were not fond of having it all destroyed by "niggers" that ruined their neighborhood and property values. My colored neighbors were the last ones to sympathise with the rough treatment of the slimeballs that actively ruined their property values by shooting up the decent neighborhood. Me too.
I am hardly a fan of the shaved headed steriod cops that pull their militarist rank on the mere "civilians"that they have nothing but contempt for.
It is a rotten cancerous society that tries to pit one race of a natural neighborhood against another that is a natural ally between both.
I am so tired as are the black people that are losing the value of their far largest investment. Putting up the payment for thirty years and having it destroyed by the gangsters truly annoys our people. My interests are the same as theirs even though I don't play bridge with them
i play chess with "them" darn good.
There are plenty of places with cheap housing and amenities and relatively crime free and clean. Plenty of good places in my area for $100,000 to $150,000, or if you can get a good foreclosure cheaper than that. An FHA loan can be had for 3% percent down. Problem is these houses are located in the smaller towns or non trendy cities. In my town of 9,000 the schools are good, the towns neat and clean, plenty of cheap recreation, food is cheap, very little crime with violent crime exceptionally rare, and the big city is only 50 miles away. The great big city 100. For $200,000 one can get a 2500 sq foot or bigger house. Many companies in the area pay quite well for "educated" workers. Rather than live in the area they commute from the big city rather than live with us "hicks", even though by living here we have a better quality of life. Then we have the others who would never live or work outside the city because they want to be downtown with the pubs and restaurants where they prefer to spend their off time and spend all their money. Living the life they see on "Friends". Or as I like to call the big cities, a womb for the insecure to live.
I believe I remember a rule of thumb that you should pay no more than 2.5 times your annual income for a home. So, following that rule of thumb, someone making $40,000 could buy a $100,000 home.
I've looked and am looking to move into a B or C list city or metro area but the problem is, as an outsider who isn't an anglo white (im a jew) is they do not want outsiders or yankees in there towns.
All the good jobs and people with skills unfortunately live in big cities and work there too.
That's why Google and Facebook setup shop in places like NYC..because top talent isnt living in Kalamazoo, MI.
At least they have a potentially longer timeline until death. They should pay more cause they will get to use it longer. Now, it is the baby boomers that don't own homes that are really fucked. The chances of them getting a home before they are dead is close to zero.
The Urban Institute is freaking full of beans.
I feel your pain. Let's hope for change and really, at this point what difference does it make?
Millenials are not into cars either. Just buses and trains so long as we have the gadget to play with.
And who needs a gloria soame if you live online. You can photoshop your life on social media. Take a picture of a hotel and pretend its your living room. WHO CARES. As for having kids! just one small one maybe.
The future is amaterialistic. Its all virtual.
"The future is amaterialistic. Its all virtual."
To a degree. Consider that a full-page Radio Shack ad from the early 80's would have shown a couple of dozen different things, including a TV, a VCR, a camcorder, an answering machine, and a TRS-80 computer, and buying all of those items would have cost you thousands and thousands of 1980's dollars. Now consider that the smartphone in your pocket does all of those things and more, and you can get a cheap one nowadays for around $150 in 2015 dollars.
Not really a question of "amaterialistic" or "it's all virtual," although that is a factor. No, it's a question of technology is advancing rapidly, and changing the basis of a lot of our old assumptions.
A "virtual life" is no substitute for a real one. Many will realize that too late.
I never had a chance to own a home as a late gen-xer. "Downsizing" was the buzz word when I entered the corporate world and I saw my first two employers go bankrupt and/or sell out. With a degree in economics I struggled to make a living, delivering furniture, salesman, working in a green house, truck driver, farm labor, bank teller...you name it. Most of those business closed up. All my friends are in the same boat. With an economics degree I am able to understand WHY I am screwed, but couldnt do much about it.
When I lost my parents, I sold the over-priced/over-taxed house, moved way-the-hell up to the mountains and bought a small house on a small farm ( for a fraction of what I sold the old suburban money pit for ). I figured, if I couldnt make a living, at least I could eat well and afford the taxes. BEST THING I EVER DID!! I sell hay, firewood, and some lamb to cover property taxes and expenses...spend most of my days working outside or relaxing inside. I eat mostly all organic, free range food. I have no boss. I heat my home for free, with wood cut with my own hands. I am healthier, happier, and freer. Fun in summer means going down to the creek for a swim ( not spending money on cheap junk ). I have no credit cards, no cell phone, no debt and just one old pick up truck that we use occasionally. I wear carhartts until they fall off. I dont care.
...OH and I met a like-minded woman up here....we got married last year and have a 3 week old son.
Add Airbnb and uber and you are all set.
Bullshit, the whole world will be on sale soon, you just need some dry powder.