A blog post

Gen Y: The End of the Home Ownership Dream?

Posted on the 13 November, 2008 at 10:00 am Written by in Blog, Gen Y Trends


What a great time for first-time home buyers, right? They have the good fortune to buy at what may be close to the market low (we hope) without having to sell at that same low point. Well, as usual with Gen Y, it’s not that simple. While the average age of first time home buyers is 26, realtors shouldn’t expect waves of Millennials to be knocking on their doors. While the under 30 set may enjoy high incomes and high hopes for future earnings, both their attitudes about homeownership and the reality of high debt are certain to impact their likelihood rushing in to snap up real estate deals.

First is attitudes. Millennials do not aspire to the homes many grew up in. They see a big backyard and lots of square footage as a maintenance nightmare. Smaller living spaces and open space floor plans are likely to be their preferred way of life, for environmental as well as lifestyle reasons. The NewsObserver recently interviewed several Gen Y members on their dreams of homeownership. Here’s what they said about the desirability of living in a big house:

Stephen: No. I want a smaller space so it’s easier to take off and go. A house that’s low-maintenance is good. Generation Y traveled a lot in college and will continue to do so through life. So a big yard isn’t a plus, either.

Ryan: No. I think that seeing so many of our generation’s parents divorce makes us understand that family togetherness is important. So as we start having kids you will see us avoid homes with a living room, family room and finished basement rec room in favor of open-plan homes where the family can share space.

Carrie: Definitely not. The huge space thing as a status symbol is gone. Well-used efficient space is best. I want a house that reflects who I am and where I’ve been. In big houses, people buy meaningless stuff just to fill them up. Living in a cookie-cutter subdivision with vinyl siding and no trees is not palatable to me.

Second is finances. Even if they aspire to home ownership, it’s harder now to amass the necessary down payment of $30,000 or more. It’s been widely reported that the average college debt is $20,000. Many struggle to pay it back, while making ends meet. Many still accept support from parents. Higher income Millennials in our focus groups, those with MBA’s and good paying jobs, tell us of staggering college debt loads — $60,000 or even $80,000. While these civic- and community-minded young adults are motivated to dontate to their college and other causes they believe in, they sheepishly admit it just isn’t possible right now.

Add inexperience in budgeting and planning, credit card debt and the uncertainty of the job market, and the picture becomes even more grim. Consider these statistics from MSN (Why Gen Y is Broke):

The median credit-card debt of low- and middle-income people aged 18 to 34 is $8,200

People between the ages of 25 and 34 make up 22.7% of all U.S. bankruptcies (but just 14% of the population at large).

While the facts are sobering, Millennials are cautiously optimistic rather than dismayed. They have the long view, and are confident in their skills and abilities. As one young potential home buyer shared with me, ‘With so much for sale, we can afford to be picky right now and get a really great deal.’

  • Morgan Coudray

    Great post Carol!
    I’ll add to the insights.
    “My home will be of medium size and extremely functional, it will have an open-space concept, have a balcony and the rooms will be noise-proof.”
    From a 21 year old canadian who will be on the job market starting next year.
    :D

  • Morgan Coudray

    Great post Carol!I’ll add to the insights.”My home will be of medium size and extremely functional, it will have an open-space concept, have a balcony and the rooms will be noise-proof.” From a 21 year old canadian who will be on the job market starting next year.:D

  • sarah

    I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Sarah

    http://www.thetreadmillguide.com

  • sarah

    I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Sarahhttp://www.thetreadmillguide.com

  • http://www.thecoloradogirlblog.com/ Kelly

    I enjoyed the blog but feel that although many Gen Y folks have debt so do Gen X and they purchased homes. Actually studies show that even though millennials do not want the type of home their parents and grandparents had/have they do see the importance of buying a home and many purchase their first home while they are still single and unattached. As far as their down payment goes, many of the milennials purchasing a home will get their down payment from their parents or a family member. Remember that Millenials were and continue to be spoiled and over indulged by their baby boomer parents.

  • http://www.thecoloradogirlblog.com Kelly

    I enjoyed the blog but feel that although many Gen Y folks have debt so do Gen X and they purchased homes. Actually studies show that even though millennials do not want the type of home their parents and grandparents had/have they do see the importance of buying a home and many purchase their first home while they are still single and unattached. As far as their down payment goes, many of the milennials purchasing a home will get their down payment from their parents or a family member. Remember that Millenials were and continue to be spoiled and over indulged by their baby boomer parents.

  • http://millennialmarketing.com Carol Phillips

    Kelly:

    thanks for reading the blog. I hear you on the indulged part, and agree they will buy eventually. But many Millennials do not see home ownership as part of the dream or the investment it used to be. I think they will buy ‘differently’ — different types of homes, different financial relationships.

    Carol

  • Kevin

    Carol,
    You spoke to my class at UMKC the other night and I was very interested in your presentation and decided I would follow along with you and your research. I think another reason why Gen Y won’t be as big into home purchases also falls in line with the fluidity in their lives. Many Gen Y’s are probably going to move around and experience a lot while they are young, thus not settling down in one place. I think a lot of Gen Y’s will be in the market closer to their mid 30′s into their 40′s once their family is really beginning to take shape.

  • Kevin

    Carol,
    You spoke to my class at UMKC the other night and I was very interested in your presentation and decided I would follow along with you and your research. I think another reason why Gen Y won’t be as big into home purchases also falls in line with the fluidity in their lives. Many Gen Y’s are probably going to move around and experience a lot while they are young, thus not settling down in one place. I think a lot of Gen Y’s will be in the market closer to their mid 30′s into their 40′s once their family is really beginning to take shape.

  • http://millennialmarketing.com/ Carol Phillips

    Kevin:

    Thanks for following. Yes, your thoughts about geographic fluidity are exactly what the lastest post is about – “For Millennials, Is Google the New Home”?

    Carol

  • http://millennialmarketing.com Carol Phillips

    Kevin:

    Thanks for following. Yes, your thoughts about geographic fluidity are exactly what the lastest post is about – “For Millennials, Is Google the New Home”?

    Carol

  • http://millennialmarketing.com/ Carol Phillips

    Kelly:

    thanks for reading the blog. I hear you on the indulged part, and agree they will buy eventually. But many Millennials do not see home ownership as part of the dream or the investment it used to be. I think they will buy 'differently' — different types of homes, different financial relationships.

    Carol

  • John

    I think one point we're missing is that the fluid, dynamic lifestyle of a significant percentage of the Gen Y'ers is/was paid for by parents who often were living themselves on credit cards and home refinancing. In fact, the globe hopping “lifestyle statement” of Gen Y is just as much a status symbol as their parents big house. What these kids don't seem to realize is that for the vast majority of them the day will come – sooner than they might think – where they actually need to be self sufficient. Your life becomes much more static when you can't even pay your student loans. That's why you hear of major universities worrying about what they call “teacups” being essentially non-viable once they truly need to leave the nest. Perhaps a few less parent paid trips to Prague and more summer jobs would have served them better. Do I think of Gen Y as a bunch of spoiled brats? No, sadly, I see them as a generation with minimal real coping skills and a pretty naive outlook, destined for disappointment that they may never truly understand.

  • http://www.brandamplitude.com Carol Phillips

    John:

    Your points hit home, and I think many Gen Y'ers would agree with you. Kids and teens feel the pressure of living up to the lifestyle they have enjoyed courtesy of their parents. I am less inclined to agree with you about the naivete and coping skills. No doubt it is true of some, but remains to be seen. We may see an outpouring of creativity, at least I hope so.

  • http://www.brandamplitude.com Carol Phillips

    I believe that some of the motivation for travel is 'bragging rights' as much as experience. Perhaps luxury and status symbols are changing, but still with us. Interesting comment, thanks for sharing.

  • http://www.brandamplitude.com Carol Phillips

    I believe that some of the motivation for travel is 'bragging rights' as much as experience. Perhaps luxury and status symbols are changing, but still with us. Interesting comment, thanks for sharing.

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