Almost daily, there’s another article focused on the Millennials. (Seriously, a Google News search of “millennials” returned 3.17 million results in 0.30 seconds.) Generally, the articles will make broad claims that Millennials are entitled, spoiled, and lazy, while others will seek to counter those opinions about how mil. Yes, we’ve talked about America’s largest generation ad nauseam, but an issue with millennials is rearing its ugly head and it affects all of us. Millennials are growing up–with the oldest hitting their mid-30s–and more frequently, Millennials are eschewing home ownership, out of necessity or fear of another crash. With home prices and sales rising steadily across the country, this presents Millennials a cause for concern moving forward or an opportunity.
Millennials by and large would like to own a home, but cannot quality for a mortgage (thanks student loans) or they are unable to make enough to save for a downpayment. According to a recent AP story, the average time someone rents before buying a home now reaches 6 years. Forty years ago, that number was only 2.6 years. It’s a staggering increase in the amount of time Millennials spend moving from rental to rental, foregoing one of the backbones of middle class America. According to a recent study conducted by the Urban Land Institute, 50 percent of Millennials rent, 21 percent live with their parents, and only 26 percent own a home. Think about that for a second. More than 70 percent of American Millennials either rent or live with their parents. That’s nearly 53 million Americans from just one generation who do not own a home.
Additionally, the incomes of Millennials make homeownership unattainable, given the current cost of housing. Citing the same ULI study, 53 percent of Millennials make less than $50,000. Median home prices across the U.S. exceed $140,000, which is a paltry sum compared to housing costs in some millennial landing grounds like San Francisco, New York City, Washington D.C., or Denver.
While housing costs prevent Millennials from getting ahead and many are over-educated, under-employed, and often burdened by a heavy load of student loan debt, Millennials seem rather optimistic for the future and that’s a positive sign. Sixty-four percent of Millennials expect to either by a lot better or somewhat better off than their parents. Just 12 percent think they will be worse off. This is good news. Despite the debt, the inability to qualify for a mortgage, and stagnant wages, Millennials believe the future will be better than the past or present. The optimism they show needs to translate into action by our current leaders.
Whether you like or hate Millennials, there’s no question of the impact the country’s largest generation will have on our economy. If politicians start acknowledging the emerging young adults, many of whom are starting families, careers, and adult lives, perhaps we can stave off any serious implications Millennials may face. On the Democratic side, Hillary Clinton and Bernie Sanders have addressed the need for student loan reform, and it seem likely that if one of them wins the White House, that will be a top priority, but it goes beyond that. While job growth has remained steady throughout the Obama years, wages remained stubbornly stagnant, something that dates back more than three decades.
Reforming the student loan system is a good first start. Earlier this year, student loan debt exceeded $1.2 trillion, an absolutely staggering sum. As college costs continue to rise, students will continue to turn to loans, meaning the troubles faced by Millennials will soon consume the next generation, Generation Z.
So, who in the future will have the ability to afford homes, or does that really matter?
What happens next is rather interesting. Despite some areas going right back to building oversized homes and other over-priced homes that are simply too big and too expensive for the next generation of homeowners, other areas are pursuing a new strategy: urbanizing the suburbs.
Metro-Atlanta is a hotbed of “suburban-urbanizing,” as Atlanta tackles two gigantic elephants in the room: traffic and attracting and retaining young adults. There’s no question, Atlanta’s traffic nightmare drive residents and passers-by mad. Traffic jams can bring your day to a standstill, while you bash your head against the steering wheel asking yourself why this is happening to you. After failing to pass a 1-cent sales tax for transportation projects in 2012, metro-Atlanta went back to the drawing board. Rather than building new train lines, the state opted to build toll lanes along I-85, 75, and 285, and the suburbs decided to put a new spin on suburban living. The McMansions remain, but alongside the gaudy houses of the mid-2000s are an increasing number of town homes, apartments, and mixed use developments. In fact, Atlanta’s sprawl has halted, with 60 percent of recent developments encompassing only 1 percent of the land.
As the city center redevelops, rental prices exceed millennial budgets, with rent approaching–or exceeding–$2000 per month. An ungodly sum of money, especially when you consider a majority of Millennials are pulling in less than $50,000 per year. The suburbs remain a cheaper option, but as young people desire a more urbanized feel, developers are quickly pulling the trigger on mixed use developments. Millennials certainly aren’t living in squalor and as the most educated generation in American history, one would think the jobs held by Millennials would allow them a nice lifestyle, albeit one that does not allow for home ownership. Renting an upscale apartment in a suburban mixed-use development doesn’t require one to qualify for a mortgage, nor does it require the same sort of downpayment as a house, neither of which Millennials are likely to afford.
When you consider traffic and endless sprawl, the problems that plague our modern suburbs, it is unsurprising that “urbanization” has taken root across the country. Livable, walkable communities are springing up and presenting all generations with an opportunity: enjoy the amenities of living in a city center, without having to drive there, nor dealing with the high cost. While none of this solves the larger problems of student loan debt, the inability for young people to qualify for mortgages, nor the wealth and income inequality faced by millions of Americans, we can and will remake our infrastructure to better fit the current American mindset. Some of these developments are as gaudy and opulent as the McMansions nestled in nearby secluded neighborhoods, but we’ve come a long way in shifting the sands of the suburbs from endless sprawl, to an urbanized core of homes, shops, and restaurants that are walking and bike friendly.
If your community is not considering this type of development, then it might be time to schedule a meeting with your county commission or city council. Smart growth, aimed at young adults and retiring boomers might be a way to avoid another housing bubble and ensure the “indebted generation” can manage student loans, other financial obligations, and their monthly rent, while living in a nice, quality community. Millennials want to be homeowners (ULI found 62 percent of Millennials want to own single-family homes by the year 2020), but reality may prevent that from happening. If wages remain stagnant, along with the rising cost of education, Millennials may find homeownership just out of reach, even by the time they reach their mid to late 30s. The urbanization of the suburbs may not solve the problem of homeownership, but it certainly provides the opportunity for comfort, livability, and satisfaction sought by every generation of middle class Americans.
For this to truly work, we have to ween our economy away from over-dependence on the housing market. Generation-X–the generation most likely to be in the market for a home–is far smaller than the Boomers or Millennials, meaning at some point the demand for existing and new homes must wane. The current market seems unsustainable, even if the economic gains made over the past several years continue unabated for years to come. From this comes two question: what do we do with overbuilt suburbs and how do we transition to an economy less dependent on a strong housing market? For now, economists, realtors, investors, buyers, and home builders probably don’t care. The market is strong, and homes are selling high, but what happens when you’ve tapped the market of home buyers dry? Will the market bottom out or will we start replacing older suburbs with new, urbanized suburban cores?
It’s easy to think about the immediate, but it’s never too soon to plan for the future. It would behoove cities and towns across the country to start the planning and development now before any bubble gets too big. Meanwhile, us Millennials will continue to rent, attempt to pay student loans, and hope like hell we make economic change that benefits a generation carrying a trillion dollars in debt (and climbing).