Millennials are moving significantly less than previous generations. What factors force millennials to stay at home unlike their parents' generation?
What makes this statistic so interesting is that the normal reasons that stop migration (having a spouse, owning a home, having a child) are not found commonly amongst millennials. So what is causing millennials to stay put?
Economic factors that are stopping millennials from buying houses
35 percent of the current workforce are millennials, aged 21 to 36, but another 12 percent of millennials are unemployed or not engaged in the workforce at all.
The differences between millennial generation and older generations:
- The generation seems to work extremely hard with an average of 45 hours per week
- 21 percent of working millennials hold a second job just to make ends meet
- Millennial unemployment is double the national average, and the rates are higher for minorities
- Millennial salaries are 20 percent less than baby boomers' salaries for the same positions as the same age
- For those working between the ages of 18 and 34, less than half feel they have the education or training to move ahead
With millennials stuck in situations like these, they need to receive some form of education in order to advance. The problem is education requires money -- money that they often do not have.
College can actually hurt millennials who plan to move out
The decline in home-ownership links directly to the increase in public tuition and its resulting student debt. Unfortunately, the de-funding of higher education shifts the financial burden from the state to the student. As the average family income shrinks and the median home value rockets, the real question is... who can afford to purchase a house?
- Once millennials are ready to move out, the incentives are historically different from earlier generations as it's not necessarily due to homeownership, child rearing or marriage.
- The largest reason to leave is to find a home, but millennials are finding homes at significantly lower rates. In fact, home ownership in 2016 among younger citizens was at the lowest it has ever been in 40 years.
- This has something to do with lending. Lending standards are much tighter and makes getting a mortgage increasingly more difficult. Coupled with the university debt a large part of the generation are paying back, home ownership is decreasing at a substantial rate.
First-time buyers feel stuck in rentals instead of buying
The housing market does not seem affordable for the median income level of this age group. As rent continues to rise across the country and wages remain stagnant, it becomes more challenging for renters to save enough money for a down payment. Plus, inventory of for-sale homes is limited in popular markets, leading to bidding wars and bolstered sale prices. First-time buyers may feel like they cannot compete and stick to renting.
Buying a home is one of the most expensive purchases of a lifetime, and buyers should carefully review their options and analyze their own affordability before closing on a home. Think long-term about the:
- Overall community
- Neighborhood amenities
- Commute time
- Proximity to schools, if family is in the future
Mortgages can be commitments of 30 years and longer if owners refinance along the way. Be prepared to make payments on time and cover the additional costs of maintenance of about 1 to 4 percent of a home's value each year.
On a positive note, some of the most common home loan types require as little as a 3 percent or 5 percent downpayment, broadening the options for millennial affordability. Assuming buyers put down 5 percent of the home's value at closing and spend 30 percent of their monthly income on a mortgage payment (factoring in the median millennial income), Zillow determined millennials can afford to buy 70 percent of homes on the market, especially if they know where to shop.
- For instance, Honolulu is a bad choice and not affordable, with only 25 percent of its inventory within budget for millennials
- And although it may not be a millennial's number one choice, Akron (OH) offers 90 percent of its for-sale homes within the millennial budget
- Other areas where millennials have great odds of home buying are Buffalo, NY (86 percent), St. Louis, MO (85 percent), Des Moines, IA (85 percent), Pittsburgh, PA (82 percent), Louisville, KY (80 percent) and Kansas City, MO (80 percent)
Educated millennials are moving to cities instead of suburbs
This youthful generation has very unique living and spending habits and prefer many features of urban living instead of the suburbs that their parents favored. Cities are pinning their futures on attracting and holding on to millennials for decades to come, because the industries they bring spur technological innovation and urban revitalization.
It's wholly accepted that millennials are at the forefront of these urban upgrades, but in what cities is it most apparent?
- Chicago is leading the way, gaining almost 16 millennials with at least a Bachelor's degree, for every one added to the surrounding suburbs. In total, Chicago has the third highest population of educated millennials behind New York and Los Angeles.
- Despite rather slow growth, metro areas like St. Louis, Detroit, Pittsburgh and Cleveland still outperform their nearby suburban areas. These core cities, in addition to Riverside and San Bernadino, are making substantial gains that are building from very small bases. Educated millennials make up less than four percent of the populations of these cities.
- Several other core cities, like San Diego, San Francisco, Oakland, Portland, Charlotte, San Antonio and Sacramento are finding more educated millennials moving to the outlying suburban areas rather than in core cities. The reasons why this generation is choosing to eschew suburban living are hard to determine, but it seems like millennials will be reshaping the metropolitan landscape for decades.
Millennials are not in debt because of avocado toast
Recently, a viral off-handed comment blasted the millenial drive towards small comforts. Is this the reason why many could not afford to purchase a house? Tim Gurner, a millionaire and luxury real estate mogul, criticized an entire generation for not working hard enough.
"When I was trying to buy my first home, I wasn't buying smashed avocado for $19 and four coffees at $4 each," Gurner said. "We're at a point now where the expectations of younger people are very, very high. They want to eat out every day; they want travel to Europe every year." He didn't forget to add appreciation for his own age group. "The people that own homes today worked very, very hard for it."
Ouch! Sorry Tim, the Federal Reserve just published research contradicting your controversial yet hysterical insult. There is no proof millenials eat out more than their parental counterparts. Although, Americans (as a whole) spend more dining outside of their home than in 1970. That includes Gen-X and Baby Boomers.
What do you think? Are millennials as hardworking as previous generations, or do they want everything handed to them?