Millennials forced to put homes on hold

Associated Press

WASHINGTON

Homeownership, that celebrated hallmark of the American dream, is increasingly on hold for younger Americans.

Short of cash, burdened by student debt and unsettled in their careers, young adults are biding time in apartments for longer periods and buying their first homes later in life.

The typical first-timer now rents for six years before buying, up from 2.6 years in the early 1970s, according to a new analysis by the real-estate data firm Zillow. The median first-time buyer is age 33 – in the upper range of the millennial generation, which roughly spans age 18 to 34. A generation ago, the median first-timer was about three years younger.

The delay reflects a trend that cuts to the heart of the financial challenges facing millennials: Renters are struggling to save for down payments as wages have largely stagnated. Increasingly, too, they’re facing delays in some key landmarks of adulthood, from marriage and children to a stable career, according to industry and government reports.

These shifts help explain why homeownership, long a source of middle-class identity and economic opportunity, has started to decline. The share of the U.S. population who own homes has slid to 63.4 percent, a 48-year low, according to the Census Bureau.

And when young adults do sign the deed, their purchase price is now substantially more, relative to their income, than it was decades ago. First-time buyers are paying a median price of $140,238, nearly 2.6 times their income. In the early 1970s, the starter home was just 1.7 times their income.

Millennials are “still very interested in buying a house, but they’re delaying that decision,” said Svenja Gudell, chief economist at Zillow. “Once they start having kids, they begin looking for homes. We’re also finding that – given how much rental rates are currently rising – a lot of folks are having a hard time saving for a down payment and qualifying for a mortgage.”

Low mortgage rates have eased some of the pressures caused by the higher prices. But in many of the hottest job markets, the gap between home prices and median income is prohibitively high.