The U.S. housing market is improving, and has totally recovered in some cities. But since the housing market has not completely recovered from the 2007 housing crash, it now seems fashionable to find a scapegoat, usually the Millennials, to explain sluggish home sales.
Are Millennials Refusing to Grow Up?
More than any other generation in recent history, the 18-34 year old Millennials are staying with their parents longer, and avoiding marriage. Because they are not forming their own households, marrying and then having children, their homeownership rates lag the rates of prior generations.
Data released by the Pew Research Center show that approximately 26 percent of Millennials are married. When Gen Xers were the same age as the Millennials are now, approximately 36 percent of them were married. For the large group of Baby Boomers? Forty-eight percent were married when they were the age of the Millennials.
In theory, Millennials should be doing better financially than previous generations since more of them are graduating from college. College-educated Millennials do, in fact, have higher income than workers their age in prior generations. Being better educated has not translated into greater economic success for Millennials overall, though, because of other factors.
Better Educated, but Drowning in Debt
Millennials have more education, but they also have more student loan debt. Due in large part to the timing of the recession, Millennials also have higher un- and underemployment rates than Boomers had at the same age. In fact, overall Millennial unemployment rates remain higher than unemployment rates in 2009-2010 (during the most recent recession) and in 1982 (the prior recession).
The timing of the recession partially explains why Millennials have accumulated less wealth than earlier generations and are generally worse off than their parents were at their age. And changes in the U.S. labor market explain why the median income for some Millennials (those who lack a bachelor's degree) is significantly lower than the income workers with similar educational backgrounds from previous generations earned at the Millennials' current age.
Of course, some Millennials are doing very well financially and resemble earlier generations. College-educated Millennials with college degrees are, like earlier generations, more likely to be married. In addition, higher-income college graduates in this generation, like earlier generations, are more likely to own homes. Despite these similarities, fewer Millennials actually resemble earlier generations.
The Racially Diverse Millennials
The Millennials are the most racially and ethnically diverse generation in U.S. history. Less than 60 percent of all Millennials are white. In contrast, whites make up the vast majority of the Silent Generation of older Americans (80 percent) and approximately 73 percent of Baby Boomers are white. Future generations will be even more racially diverse, as Census data show that the majority of babies born in the U.S. are non-white. The Harvard Joint Center for Housing Studies projects that, in about 10 years, racial minority households will be 36 percent of all households, and will be 46 percent of the households that should be first-time home buyers.
Whites overall have always had higher marriage and homeownership rates, but lower unemployment rates, than blacks and Latinos. Given this, the browning of America does not bode well for future homeownership rates. In fact, if black, Latino, and Asian Millennials have the same homeownership rates as their parents, the U.S. housing market may never recover.
Overall homeownership rates in 2013 were approximately 65 percent, and white homeownership rates were 73 percent. Homeownership rates for blacks were much lower, approximately 43 percent. Homeownership rates for Latinos (46 percent) and Asians (56 percent) also lagged overall and white rates.
Data from the Bureau of Labor Statistics show the dramatic disparity in the unemployment rates for white and non-white Millennials. While the overall unemployment rate for 20-24 year olds is 10.8 percent, the rate for whites in that age group is 8.8 percent. The black unemployment rate is more than double (19.3 percent) the white rate, and the Latino rate is 10.5 percent. Similarly, the overall unemployment rate for 25-34 year olds is 6.3 percent, but the black rate is more than twice (12.9 percent) the overall rate. The unemployment rate for Latino 25-34 year olds (6.7 percent) is close to the overall rate, but still higher than the white unemployment rate (5.2 percent) for that age group.
It's Not Their Fault
Millennials do not appear to be avoiding homeownership because they are slackers or because they are too irresponsible to grow up and put down roots. Instead, they are delaying marriage, staying with their parents, and avoiding home purchases for a very sensible reason: they are burdened with debt and concerned about their economic future.
The U.S. economy is largely driven by consumer spending, and a recent Standard & Poor's report argues that income inequality is preventing sustained economic growth. The economy will remain sluggish as long as the Millennials' economic prospects remain bleak.
Whether Millennials should be blamed for the stalled housing market is debatable. What is not debatable is that the housing market as we have known it is doomed unless Millennials can somehow feel more confident about the future, and unless we find a way to close the racial homeownership gap.
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