Many things have been said about the millennial generation (Born 1981-1996) over the years.  The negative generalizations that are frequently applied to this generation in the media are “entitled,” “narcissistic” and “lazy.” (Incidentally, they are tired of being blamed for just about everything.)  However, there are some facts worth considering

 

In 1992                                                            In 2018

Average Home Cost:

$80,626                                                            >$265,000

Average Student Debt:

$5,200                                                               >$35,000

Average Family Income (after taxes)

$59,000                                                              $86,419

Fixed Mortgage Rate:

9.71%                                                                  4.65%

 

Today the average home costs 300% more, student debt averages almost 700% more but family income is only 46% greater than in 1992.  The good news is that the average fixed rate mortgage is about half what it was in 1992.  Unfortunately, the average millennial, due to high student debt, has a credit score of 625  (per NerdWallet) so they may not qualify for the lowest mortgage rates available. A Millennial today is worth 21% less than his 1983 counterpart while the net worth of a 60 year old is twice what it was in 1983.  So young folks are getting poorer while older folks are getting richer.  Is it any wonder that New Home Creation by this generation after graduating from post-secondary educational institutions has been delayed 2-3 years? The Quick Answer is “No”.   These are the contributing factors that support the statistics that show millennials are worse off than their parents.

GOOD NEWS: This generation is not willing to engage in profligate spending like some preceding generations.  They are more likely to move back home to save money to pay down student debt.  Contrary to messages on late-night comedy shows, they do not want  to move back home into their parents’ basement to play video games.  In fact, my personal experience with Millennials is that they are not likely to purchase a home for a price as high as their mortgage pre-approval will allow.  Other generations frequently spend every dollar that their pre-approval will permit.  It is not uncommon for millennial buyers to have a mortgage pre-approval for an amount that is 10-20% greater than what they actually want to spend.  Why? these buyers witnessed first hand when friends, neighbors, or family members were unemployed, and/or under-employed, and had to Short Sale their homes, or worse, experience a foreclosure.  That experience is still very fresh in their memory, so they are willing to take the steps necessary to lessen the chance that they will have such a traumatic experience.

Can anything be done to mitigate this situation? Possibly.  The National Association of REALTORS®  has a Federal Policy Position that would provide tax relief to student debt holders and employers who assist their employees’ student loan debt burdens.  In addition, the National Association of REALTORS® supports policies that provide tax relief to those borrowers with forgiven student debt.  We need to convey to our political representatives in Washington DC that there are things that can be done to address the student debt issue…if we work together.

Not all is “gloom and doom”.  This is the most educated generation, and the most tech-savy generation, in history.  As the economy rebounds real wages will increase, and due to their fiscal discipline, these consumers will be well-positioned to save money at a rate that has not been seen “in generations” 😉

The millennial generation is fantastic for the housing industry because their shear  numbers indicate that demand for homes will not abate for years.  So all of my REALTOR® colleagues across the country can rest assured that the demographics favor a sustained positive environment for home sales.  For everyone else this is also good news because when the housing market is strong the economy is not likely to falter.