“Homeownership has long been central to Americans’ ability to amass wealth”, according to the report on a study by researchers at the Joint Center for Housing Studies at Harvard.
And…
“Millennials are less likely to be homeowners than young adults in previous generations”, according to The Council of Economic Advisers in the Executive Office of the President.
Are you seeing the disconnect, Millennials? Even in times of economic hardship, (remember the Great Recession?) 
homeownership is a strategy that is considered effective for building wealth. And we, as a generation, are not participating.
As for the reasons that Millennials are delaying or opting out of homeownership, research points to the following…
- Millennials have stronger relationships with their parents than previous generations, as thus, have an increased likelihood to live with parents into adulthood
- Increased college enrollment has young adults delaying their entry into the workforce, resulting in a delayed ability to finance housing
- Millennials are delaying marriage until later in life than did previous generations
- The fact that homeownership decisions are often tied to job prospects, and Millennials may value the mobility that comes with renting homes instead of buying them as they consider job opportunities in different locations
- Sixty-seven percent of those under age 30 have credit scores below 680, which is considered a low score, and one rejected credit application may discourage Millennials from pursuing another home loan
- Rising student loan debt may present a financial burden that prohibits the ability to finance a home (this one is not confirmed by research to be a factor as the others listed above are, but it is being discussed)
You can see that in some cases, it is with good reason that Millennials are delaying the purchase of a home. Depending upon the circumstance, there can be advantages to renting over buying. The New York Times article that reports on Harvard’s research points out that simply the lifestyle choice to rent is a valid one. There is typically less home maintenance when renting, and the ability to move easily at the end of a lease agreement is an attractive option to some. Income constraints also may make renting the better (or only) choice for some young adults. But “as a means to building wealth, however, there is no practical substitute for homeownership”.
Why is homeownership a means to building wealth? To put it as simply as possible, as we look at trends over time, the net worth of homeowners has been significantly higher than that of renters, who tend to accumulate very little or no wealth. Again, why? First, those paying off a home loan are building wealth by paying their mortgage. They build equity in their home with each payment. And, they are doing this each month in a consistent and disciplined manner. Second, it is likely that the market value of your home will increase with time. For several decades, housing prices throughout the country increased an average of four percent each year, (although housing prices can go down as well). Renters can only keep up with this type of wealth building if they invest an amount equal to a down payment plus any savings accumulated from renting, and most renters aren’t doing that.
Save – Save – Save
So, Millennials, we need to consider these facts, and take the steps toward homeownership if that is one of your goals.
The first step is simple – save!
- Save as much money as you can each month.
- Pay your other bills and debts on time.
- Consider having money deducted automatically from your paycheck. Have your bank do a direct transfer of your funds into a savings account every paycheck.
- Save – even if it is a small amount. You can probably make choices in day to day living that allows you to save (skip that extra coffee or tea and bring a beverage from home to save money).
- See if your employer can split your paycheck by depositing some into your checking account and some money into your savings account.
- Check and see if your employer offers a deferred compensation program. By deferring a small part of your salary, you are building savings that will help you in retirement and save taxes today.
