As the first generation to enter the housing market since the 2008 financial crisis, the behavior of millennials in the market is something that economists and real estate investors alike are struggling to understand. While they still share the same rush to “grow up” and begin their jobs in big cities, fewer aspire to settle down in a suburb and start a family any time soon.
Today’s college students do not even appear to have the property issues of 2008 on their radar, and it looks like their primary concern is the job market and being able to find steady income after graduating. If you crunch the numbers, their concerns are justified; many students today graduate six figures in debt just to make $30,000 a year with their degree. College students polled at the University of Arizona said that they would never sign a mortgage that would obligate them to 30 or 40 years, likely from fear of the debt they’ve already accumulated on campus.
For this reason, many grads are choosing to move back in with their parents after college in order to save up for future property ownership. A staggering study by TD Ameritrade polled over 2,000 young millennials between the ages of 15-28, asking what their plans were after college. A jaw-dropping 50% of those currently enrolled in college or who intend to go to college planned to move back home after they finished their studies. This is the highest percentage since the 1940s when the stat was at 29%, according to Pew Research center. By 1950, only 12% of graduates lived at home.
Another major concern for these students is the lack of information provided by their universities regarding logistical planning and living arrangements following their graduation. Many complain that they do not learn any concrete information about taxes, developing credit, or buying a home in a class setting, leaving them feeling overwhelmed.
With that being said, the older generation of millennials is now finally starting to get on the road to the suburbs. Up until recently, the rate of household growth has been running at half the rate one would have expected based upon the rate of population growth, according to the Harvard Joint Center for Housing. Incomes are finally beginning to increase for this older age group and, while it may have taken them up until their late 30’s, they are finally settling down, resulting in an overall demand for new homes nationwide.
Where are these millennials moving? Like their younger counterparts, it appears that their main priorities in terms of location are strong employment and wage growth, according to NAR economist Nadia Evangelou. In 2017, Madison, Wisconsin had the largest percentage of millennials move into the region, followed by the San Diego metro area and New Haven, Connecticut.
Even though these adults are finally fueling the housing market after the Baby Boomers took over, the fear and hesitation that younger millennials still have towards home ownership is worrisome. In order to better prepare America’s youth to invest in their future home, it is critical that students consider how to effectively handle their loan debt.
Primarily, it is essential that students read the promissory note and understand the terms of their student loans. They should have a full understanding of what their monthly payment will be once they graduate, and universities ought to ensure they are aware of their options regarding student loan refinancing, income-driven repayment plans, and student loan forgiveness. There are several student loan calculators available to help students pay off their debt faster, which can both relieve stress and open the door to future investment opportunities. Students should also consider employment that can assist with loan payment or forgiveness.