The U.S. economy was one of the chief topics during the 2016 presidential election. The candidates held strong opinions on jobs, trade, taxes, wages, college, the Federal Reserve, infrastructure, Social Security and Medicare. Yet they said very little about home ownership or the role it plays in the economy.
Millennials are far behind their older counterparts when it comes to home ownership, and owning a home has long been an important element of the American Dream. According to a recent article in The Atlantic, Millennials fall into two categories: the mobile and the stuck. The mobile — typically white, upper class, educated — have put home ownership, marriage and starting a family on hold in favor of the freedom to pursue their careers. The stuck are often poorer, less-educated minorities who feel the need to live with their parents because home ownership seems out of reach. Still, Millennials hunger for homes of their own, especially Hispanic Millennials.
Hispanic Millennials believe in the American Dream much more than non-Hispanic Millennials. Hispanic Millennials are more likely than non-Hispanics to agree that owning a home is a top indicator of success. Yet Hispanic Millennials are not very optimistic about the prospects of taking out a mortgage and purchasing a home. According to the Hispanic Millennial Project, 29% of non-Hispanic Millennials plan to get a mortgage compared to only 21% of Hispanic Millennials. Of all Millennials not planning to get a mortgage, nearly half of Hispanic Millennials surveyed (46%) said they just couldn’t afford to buy a house right now. Another 32% said they don’t have enough money saved for a down payment.
Of the 21% of Hispanic Millennials planning to get a mortgage, 58% expect to wait at least another three years. The majority — nearly two-thirds — are saving money for a down payment. However, 63% of those potential home buyers don’t know how much they need. This offers a great educational opportunity for financial institutions. It’s time for banks to notice!
Home ownership really matters to the economy. Just look at how the exploding housing bubble rocked the country in 2008, forcing the collapse of banks once thought too big to fail. Since many Millennials came of age during that disastrous time, they may not be eager to take the same path as their parents. As a result, rental construction is booming. According to MPF Research, the nation’s 100 largest metropolitan areas have expanded by 820,000 apartment units since 2012. There were 491,945 more units under construction at the end of the first quarter of 2016. The growth rate in the apartment market is at 8.6% from 2012 to 2016. These numbers are staggering.
All the while, the overall home ownership rate is at its lowest point in 50 years, according to Forbes, and its lowest among Millennials in 30 years. Sustainable home ownership — not trying to buy more house than is affordable — leads to wealth accumulation. A typical homeowners’ net worth is $195,400 compared to $5,400 for a renter, according to the 2013 Federal Reserve Survey of Consumer Finances. Home ownership greatly benefits the overall economy. Yet without some guidance, a strong dose of education, and more savings, this could be the first generation to drop home ownership from their achievement of the American Dream.