WASHINGTON – Millennials made up 27 percent of the U.S. population and 32 percent of all home buyers in the last year, the largest percent of all home purchasers.
That’s according a survey by the National Association of Realtors.
This may come as a shock due to the stereotype that millennials are a transient generation with a dim economic future. In reality, millennials are the most optimistic demographic when it comes to the economy and the housing market.
Despite their positive outlook, millennials still face a number of challenges.
U.S. Housing and Urban Development Secretary Julián Castro and Chief Economist for Realtor.com Jonathan Smoke spoke Monday night at George Washington University about changes that would make it easier to own a home and the difficulties prospective homeowners face.
“This year we’ve monitored where somewhere between 65 and 70 percent of millennials looked at real estate online,” Smoke said. “Our survey data indicates that the number one reason millennials got into the housing market this year did so because they had an increase in income – about 35 percent of them.”
In May 2014, the Federal Housing Administration created the “Blueprint for Access,” an outline of steps that would expand access to credit.
“At FHA, the concern has been to learn the lessons that were the past so that we don’t slide back to where we were before, but at the same time ensure that we offer great opportunity for responsible folks to be able to own homes,” Castro said.
Castro was referring to the housing bubble that caused the recession in 2007 and 2008. Lenders were giving loans to people who shouldn’t have qualified for them. While some blame the government for imposing affordable-housing and fair-lending policies that would encourage more lending, others blame the excessive demand for housing and lowered standards for lending. As a result of the bubble, the number of houses sold annually was cut in half to in two years.
In January, the FHA reduced mortgage insurance premiums, or the premium people have to pay when their loan is insured by the FHA, by half a percent, saving those who qualified and applied to be FHA homeowners an average of $900 per month.
“The impact almost immediately changed the market this year,” Smoke said. “We are in the era of big data and research, and we saw an almost overnight a 30 percent change in share of folks that were using FHA.”
While these changes have created an impact, one of the issues both Castro and Smoke brought up was the crippling student debt this generation, more than any other, faces.
Smoke said the debt hurts millennials, specifically, because it makes it hard for them to build a good credit history. The younger generation is less likely to build credit when they use the sharing economy and technologies such as Uber and Airbnb instead of buying a car and making monthly payments. Because of the record wealth gap in the U.S., younger people own less. The credit system is dated – it doesn’t consider that younger people are making on-time payments for new technologies, including cell phones.
“We talk a lot about income inequality right now, and that is a significant issue that people on both sides of the political aisle are proposing policies to address,” Castro said.
Castro said the real evidence of this issue lies in the wealth gap. The issues with the economy can be derived from the housing market. Despite the effects of housing bubble, the number of houses sold in 2014 crept up to 437,000 from 376,000 in 2009, the low point in the recession.
“Generation after generation, the primary vehicle to create wealth in this country is through homeownership. And today we’ve had the lowest homeownership rate that we’ve had in 48 years,” Castro said.
Reach reporter Maren Machles at [email protected] or 202-408-1491. SHFWire stories are free to any news organization that gives the reporter a byline and credits the SHFWire. Like the Scripps Howard Foundation Wire interns on Facebook and follow us on Twitter and Instagram.
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