Setting The Stage

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Th e M Rep o RT | 23 Feature G eneration Y." "Millennials." "Echo Boomers." For all the titles applied to those born between the early '80s and late '90s, there's one that doesn't quite seem to apply these days: first-time homebuyers. As of the end of the fourth quarter of 2013, the homeowner- ship rate among those under 25 was 36.8 percent, according to the Census Bureau—only a little more than half the national rate of 65.2 percent. Compare that to as recently as 2008, when the rate among young adults was at or above 41 percent. Add to that the fact that according to the National Association of Realtors (NAR), first-time buyers—typically young adults—accounted for only about a quarter of existing-home sales in January 2014, the lowest mar- ket share for that group since the association began monthly track- ing and far below the normal 40 percent mark. Low Hopes, High Debts T here are many reasons would-be Millennial buyers are reluctant to come to the table, starting with the most ob- vious: The job market just isn't where it needs to be to support household formation. As of De- cember, Trulia calculated a 74.9 percent employment rate among adults ages 25 to 34, making it the biggest lagging factor in the housing recovery. "The job market right now is pretty tight for the genera- tion coming out of college who are just starting their career," said Jessica Lautz, manager of member and consumer survey research for the NAR. Therein lies another major problem, one that has hamstrung even those who have had better luck than others in finding work: education costs. According to the Federal Reserve Bank of New York, student loan debts grew $114 billion in 2013 alone, eclipsing all other household debts. Aside from mortgages, student loans are the only debt to have climbed above $1 trillion. Naturally, most of that balance is held by the 30 and younger crowd. "Average student loans are about $26,000, and that's just government loans," said Gregory Tsujimoto, senior consultant at John Burns Real Estate Consulting. "[Student debt] is definitely on the rise, and that's definitely a hurdle, especially with new qualifications and new debt-to-income ratios. If you throw in student loans and a car and probably some credit card debt, you're running up against those qualifications pretty quickly." The effect of this debt was illustrated in a survey conducted by online brokerage Redfin earlier this year, in which 16 percent of first-time homebuy- ers said student loan obligations prevented them from buying any earlier. For the majority of respondents, the wait extended three to four years or even longer. While student debts don't necessarily mean young adults won't qualify for a mortgage loan, in this relatively uncertain economic climate, a lot of people just aren't willing to take the risk of adding home payments on top their other debt payments. For many fresh-faced college grads, that combination represents the last lesson of their schooling, one learned long after they walked the stage: Poor job prospects plus high debts equals extended stay with Mom and Dad. The Times Are A-Changing W hile economic hurdles are the most obvious reason today's young Americans aren't out shopping for homes, there's more to it than just dollars and cents. Some analysts see Gen Y's low homeownership rate as an extension of its shift in values away from those of their parents and grandparents. This is evident not only in how Millennials approach hous- ing, but also in how they ap- proach another major life change: marriage. Statistics from Pew Research Center show as recently as 2010, the marriage rate among 18 to 29 year-olds was a paltry 20 percent, about a third the rate in 1960. At the same time, the median age for first marriages crept up close to 30 for both men and women. "Frankly, people are waiting longer [to marry]. There's kind of a pressure to wait until you're established and have reached upper middle class status," Tsujimoto said. So it's clear today's young adults aren't in the same kind of rush to go out and start their own families, which goes a long way toward explaining today's low rate of household formations. Of course, that doesn't mean new households aren't being created, even by those who have put off plans for matrimony. "Many, many couples nowa- days feel more confident in either buying a property while they're single or while they're in a relationship but before getting married," said Jordan Clarke, a Redfin agent based in San Diego. "It is no longer a requirement that you have to get married first and then buy a house." Clarke tells the story of a young engaged couple he worked with who wouldn't even put a down payment on their venue Generation Wait It Out Millenials often get a bad rap for being entitled and lazy, but are they getting an unearned title in terms of housing? By Tory Barringer "

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