Recent headlines exclaimed the homeownership rate, as reported by the Census Bureau, rose again in the second quarter of 2017. What didn’t get much attention in the reports is that the homeownership rate for American households under the age of 35 increased a full percentage point from last quarter’s 34.3% to 35.3%. Millennials proved to have the highest increase of any age group.
This came as a surprise to some considering Millennials have come to be known as the “renter” generation. However, a new study by First American, 6 Trends Poised to Reshape Homeownership Demand, revealed reasons why homeownership numbers will continue to increase for Millennials.
Millennials are the most educated generation in the U.S.
Why does that matter? First American explains:
“Our model shows that, all other factors being equal, the likelihood of homeownership increases by 3 percent for those that earn a bachelor’s degree over those with a high school degree. The likelihood of homeownership jumps another 3 percent for those that earn a graduate degree.”
The more educated, the better the likelihood for homeownership, and millennials are the most educated generation in the U.S. A big thanks goes out to all the parents who pushed their kids to go to college! (Shoutout to my alma mater Missouri State Bears!)
Homes & marriage go together
As my wife and I experienced, as soon as we were planning our wedding, we were also planning on buying our first home together. I’ve seen it often as first-time homebuyers are often young married (or nearly married) couples. According to an analysis by First American, the homeownership rate is 30% higher among married couples compared to non-married households.
Millennials have put off marriage in the pursuit of higher education. As this group ages, more and more will marry and purchase a home. Homeownership is still considered a prudent investment by professionals such as Warren Buffett and Dave Ramsey.
Parents buy houses
According to the study:
“The homeownership rate is 1.7% higher for households with one or two children compared to households with no children, and it is 5.4 percent higher for households with three or more children.”
The report goes on to say that as Millennials grow older there may be an increase in not just marriage but also in married couples with children. That will probably also create a “corresponding” increase in homeownership demand.
This also somewhat correlates with the availability and affordability of housing in St. Louis. In my experience and in the current market, you can often make a mortgage payment that is less than the corresponding rental payment of a similar house. Additionally, availability of larger rentals and ones that allow pets is hard to find. As the family grows, so does the need for space.
The Rent vs. Buy decision has many factors that come into play, such as longevity, so mortgage affordability vs rent affordability isn’t the only reason to make a home purchase. Talk with your Realtor or give me a call to determine whether renting or buying is a better option for your situation.
Wages and the Local St. Louis Economy
The study goes on to explain that recent gains in income growth and a strengthening economy will also help all generations (including Millennials) be more willing and able to purchase a new home.
Fortune magazine indicated that St. Louis was poised to become a technology hub back in 2014, and it appears that St. Louis continues to grow as a tech and start-up hub, meaning more jobs for the highly educated students, particularly in technology related careers.
Aside from jobs, St. Louis is home to many wonderful cultural experiences and activities, including many FREE things to do (like the Zoo, Museum, Muny, Forest Park, Cycling Trails and the list can go on and on…) and a thriving craft brewery scene. That bodes well for younger professionals. Recently, the Huffington Post even ranked St. Louis as the ‘Top City for Millenials,’ citing many of the things above. Check out the story giving accolades to St. Louis here.
Local First-Time Homebuyer Support
As an older millennial myself, I am not surprised with the study as my friends and clients seem to fall in line with the habits of millennials. Luckily, the state of Missouri also has first-time homebuyer programs, like the MHDC, that provide incentive money which helps get younger folks into good homes.
If you know anyone interested in ownership, now might be a great time to get into a home while these programs are still dolling out free money and interest rates are still at historic lows. Connect with a great lender to discuss whether you’d qualify.
Thinking of Buying?
Interested in discussing your options? Give me a call or text. 636-667-9549
–Will