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Will Generation Y Live The American Dream Of Buying A New Home?

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.

  1.  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.
  2. 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.
  3. 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.

Written by:

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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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

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Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

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3 Comments

  • Avatar
    June 19, 2012

    You manage to be pretty insightful with just 3 points. Things are uncertain for young people just out of college, and their American dream is likely based on living a good life– which does not involve being swallowed by a mortgage. Some “Gen Y’ers” are certainly capable of it, especially with recent government programs, but I think it speaks well of the generation that they are thinking for themselves and not adhering to tradition.

  • Avatar
    Seth Phillips
    November 8, 2012

    Why would anyone think that the Gen x or Y would rather pay more to rent than to own? To live under the rule and whim of a landlord? Oh that’s right so they can travel when they want…I get it.
    Seth Phillips
    http://www.SREInvesting.com

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