MReport September 2018

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TH E M R EP O RT | 63 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Why Don't More Millennials Own Homes? Deferment of marriage and having children plus residence in high-cost cities are reasons for lower homeownership. T he millennial home- ownership rate lies far below that of Gen Xers and baby boomers. Less than one-third of millennials own homes compared to three- quarters of baby boomers and 60 percent of Gen Xers, according to research the Urban Institute conducted. What's perhaps even more telling is that the homeownership rate among millennials ages 25 to 34 is also well below that of Gen Xers and baby boomers when they were that age. The home - ownership rate for 25- to 34-year- old millennials is 37 percent, compared to about 45 percent for both Gen Xers and baby boomers in that age range. Researchers at the Urban Institute examined millennials' homeownership rate and made policy recommendations for in - creasing it in their July report ti- tled, "Millennial Homeownership: Why Is It So Low, and How Can We Increase It?" Factors contributing to the lower homeownership among millennials include their tendency to delay marriage and having children in pursuit of higher education and their preference for living in high-cost cities with highly skilled labor forces. Here housing costs run high, and homeownership runs low. Other pertinent factors include market-related trends, such as tight credit, a decline in affordable housing, and high rental costs that hinder the ability to save for a down payment on a home. Marriage and parenthood are correlated with higher rates of homeownership in general, but the Urban Institute noted that even among millennials who are married with children, the homeownership rate remains two to three percentage points lower than for the same types of households from the past two generations. The pursuit of higher education poses somewhat of a conundrum when it comes to the likelihood of homeownership. Higher educa - tion correlates with higher home- ownership rates, and millennials are pursuing education in droves. As of 2015, 65.8 percent of heads of household ages 18 to 34 had acquired at least some college education. This is up 10 percent - age points from 1990. However, "increasing education debt has reduced millennials' like- lihood of owning a home, as debt increases their debt-to-income ratios and lowers their remain- ing income to save for a down payment," the Urban Institute researchers explained. The Urban Institute advocates increasing millennial homeowner - ship on the grounds it is a good tool for building wealth. Among the policy initiatives the Urban Institute supports are: • Offering online financial train- ing for high school and college students; • Incorporating rental and utility payment history into credit assessments; • Altering zoning and land-use laws to allow construction in markets with tight housing supply; and • Increasing fintech in the mortgage industry, which may lower costs through the streamlining of processes, as well as reduce racial and ethnic disparities. The Urban Institute mentioned research that finds minority rejec - tion rates "less pronounced" for fintech lenders. The Urban Institute also ex- amined intergenerational patterns and found correlations between parental wealth and homeown- ership and the homeownership of young adults. Citing the greater diversity of the millen- nial generation than generations past, the Urban Institute stated, "Because minorities are less likely to be homeowners and have less wealth, differences in intergenera - tional transfer of homeownership provides an additional explana- tion for the persistent disparities in homeownership across racial and ethnic groups."

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