Since the real estate meltdown happened in the 2007/2008 time frame, many families across America have seen their home prices plummet far from the original purchase price they paid, even with home improvements. Others that bought properties in the mid to late 90’s saw a spectacular run of home price growth only to see many of those gains wiped away over the past four years. With much of the home ownership across America dispersed between the baby boomers and generation X, there is a looming question around whether Generation Y will even want to own a home in the future. Is this actually still an American Dream or merely something that has turned into a Nightmare On Elm Street? Here are three reasons why Generation Y may not be a major purchaser of new homes over the next decade despite the incredibly low mortgage interest rates we are seeing today.
- Heavy Student Debt – Many people in the 20’s are still saddled with a large student debt payment. This student debt payment in conjunction with the lower than expected incomes entering the current job market creates a debt to income ratio which makes it difficult for these folks to afford the monthly payment + the cost of home ownership. Since student debt rates on Stafford Loans could return to 6.8% creating even more pressure on paying basic bills, this is one reason it will take longer for Generation Y to enter the home ownership market.
- Job Instability – Many people in their 20’s are uncertain about their job stability within both large and small organizations. They are finding it emotionally difficult to think about swallowing down a 30 year mortgage when they do not know whether career growth will be steady at their current corporation. This is coupled with the fact that corporations and non-profits alike are slowing down the rate of overall income growth.
- Change Of Money Mindset To ‘Lighten My Backpack’ – Many people in their 20’s are creating a new money mindset that ‘less is more’. Home ownership can have a heavy baggage effect if a Generation Y couple wants to do some overseas travel or see their job future changing from city to city before they create some permanent roots. Early age home ownership is not within the core philosophy of Generation Y’ers like it was for their predecessors.
If you ask most real estate sales professionals what is happening within the business, they will always tell you homes are moving and things are picking up. The generation Y couples that I see buying homes today are entering at a much lower price point which is really good. However, many of them are not willing to stretch themselves outside of their potential incomes and are cognizant that waiting may make more sense than an impulse purchase the first time a big cash windfall hits their bank account.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc – The Leaders in Gen X & Y Financial Advice and Services
Visit to www.oxygenfinancial.net to request a free consultation with the leading financial experts for people in their 20’s, 30’s, and 40’s in the country.
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