When it comes to buying a home, Millennials are taking about 5 years longer to become homeowners. Here, I take a look at some factors that may be causing this shift in the average first-time homebuyer age.
I live for a happy ending. Whether it’s in the movies, a fairy-tale wedding (hello, Harry and Meghan!), or first-time home buyers who finally land the house of their dreams, closing the deal is fundamentally part of who we are as human beings.
I’ve been thinking a lot about closing real estate deals this Spring, as so many home buyers struggle to find housing that works for them and is affordable. Millennials, notes John Burns Real Estate Consulting Chief Demographer Chris Porter, are about five years behind other generational cohorts when it comes to homeownership.
In a news release, he noted that household formation has typically risen 5 percent per year when you’re in your 20s, and homeownership rises about 3 percent during the same time period. And yet, only 13 percent of 20-year-olds head a household today, compared to 67% of 30-year-olds and 79% of 36-year-olds.
Homeownership rises an average of 3.0% per year during your 20s. Only 8% of 20-year-old householders own a home today, compared to 38% of 30-year-olds and 52% of 36-year-olds.
I’ve been writing frequently about how Millennials have “time-shifted” the major milestones of their lives by 5 to 7 years. Instead of graduating college in four years, Millennials took 5 or 6 years. Instead of moving out of their parents’ home right after college, they lived at home for a couple of years and the moved out. Twenty-five years ago, the average age of a first-time buyer was around 26 and today’s it’s nearly 34. Homeownership levels reach 50% by age 36 today, compared to homeownership reaching similar levels by age 31 in 2006.
John Burns Real Estate Consulting data also found:
- 5% of Millennials are more likely to be living with parents at age 36
- 15% of 36-year-olds live with parents/relatives at age 36, compared to just 10% of 36-year-olds ten years prior.
- Millennials are forming households two years later. Fifty percent of young adults now head a home by age 26, compared to 50% heading a home by age 24 in 2006.
In my book, 100 Questions Every First-Time Home Buyer Should Ask (4th Edition), I look at how Millennials (and their even younger cohorts) are thinking about homeownership and what it means to them. What’s been interesting is how Millennials are crowd-sourcing the single most-expensive purchase they’ll make (until it comes to buying the next house). But who do you ask if few of your friends are homeowners? You might go to your parents (which Millennials do frequently), but it’s your friends you really trust to help you make the big decisions in life. Could that be another reason (albeit smaller) for the delay in home buying?