SALT LAKE CITY — Millennials are finally beginning to buy more homes after lagging well behind their same-age counterparts from previous generations.
Still, the generation born between 1981 and 1996 is signing mortgage papers at an older average age and paying comparatively higher prices than their elders did, according to a report from Freddie Mac that says the delay may be rooted at least partly in an overlooked cause: Older Americans are choosing to "age in place," which keeps their houses off the market and drives up the price that younger generations must pay for homes.
Experts agree that home ownership has been a much smaller part of the millennial generation's launch into adulthood than it was for their parents and grandparents at a young age. The Urban Institute's Housing Finance Policy Center found that compared to Generation X and baby boomers when they were younger, about 3.4 million fewer millennials have purchased homes, even when many of them can afford it.
Pew Research Center found that in 1981, 56 percent of baby boomers ages 25 to 35 lived in homes they were buying, compared to 37 percent of millennials that age in 2016. And of Generation Xers who moved residences in 2000, 14 percent did so to buy their own homes, compared to 6 percent of millennials who did so when they were that age in 2016.
As millennials grow older, however, they are purchasing more homes. According to a new report from the National Association of Realtors, "The largest cohort in America is growing up and becoming more traditional in their buying habits." But they're not yet caught up with previous generations at the same age.
At the same time, another generation's housing choices may be affecting the market. The American Society on Aging, AARP, MetLife and others who survey seniors agree that more than 90 percent of older Americans prefer to remain in their own homes as they grow old. That choice is increasingly possible thanks to health advances, the ability to renovate homes to accommodate challenges related to aging and the availability of helper technologies.
The question raised by the Freddie Mac report is how much that decision to stay in place, at an age when people used to sell their homes, affects the ability of young adults to become homeowners. The answer depends on who is asked.
What millennials want
"Millennials are buying," Dave Anderton, communications director for the Salt Lake Board of Realtors, told the Deseret News.
He points to millennials like Taylor and Jade Dipo, 24 and 26 respectively, who bucked the millennial trend and bought a house in Taylorsville, Utah, in 2017 while both were in their early 20s.
Taylor Dipo jokes they did it for their two boxers because the price of doggie rent was adding up. But it was more than that, he said. "I think with ownership there is so much more you can do. It's a little more fun and I guess a little more stressful, too." He said his wife told him she didn't want their money "going nowhere" by renting.
Unlike many in their generation, the Dipos could afford to buy while very young. In college, Taylor had a sales job for a tech company in Lehi where "the career trajectory was very satisfying and the amount I was making was satisfying, too." He stepped out of college to work full time, while she stayed in. His savings and her credit score made getting into a home pretty simple, he said. They picked a split-level, single-family house.
Anderton said what millennials seek in housing is a bit different than previous generations. Overall, "I think just from a price perspective they're buying more multi-family or townhomes or condos, just because the price point is about $100,000 on average lower than a single-family home here."
In Salt Lake County, for example, the median price for a single-family home is around $355,000. "If you can get a townhome in the mid-$200,000 range — of course, there are some higher and some lower — that makes a big difference in your payment. And I don't know how people can afford a first home at $355,000."
Millennials prioritize two things in their house hunting, according to Housingwire.com and Realtor.com: affordability and proximity to plentiful employment opportunities.
The national realtors association report noted millennials are sick of commuting and the cost that involves, but in "fleeing the nest — 30 percent of younger millennials lived with their parents prior to buying their own home" — they also want to stay close to family. The report also noted the number of single millennials buying homes is growing, accounting for one-fifth of purchases in their age group. And millennials "often have financial help with their purchase."
Anderton said millennials are making a growing impression in the real estate market on Utah's Wasatch Front and it will just get bigger. Last year in Salt Lake County, 13,000 single-family houses sold, as did 4,852 multi-family units — "the biggest year ever in multifamily (housing) sales," he said. "A lot of that is millennials driving it."
Salt Lake County is especially interesting when it comes to millennials because it reportedly has a higher percentage of people who are millennials than comparable cities, and Salt Lake millennials also have a higher rate of homeownership, Anderton said.
Why seniors stay home
Opinion polls for decades have shown that the majority of elderly Americans say they would prefer to remain in their communities in their own homes as they age. The Freddie Mac report said improvements in health, higher education levels and better tools like telehealth make it easier to achieve that goal.
Freddie Mac said historic patterns of homeownership start to shift around age 67, after which older people are more likely to sell their homes.
At that point, they might move in with family, downsize to smaller places that require less upkeep or join assisted senior living communities, among other options. Many of their homes are then available for younger buyers.
Too few homes for sale is the "most important fundamental in today's housing market," the Freddie Mac report said, an "important barrier to young adults buying their first homes." Meanwhile, seniors like "their communities, their homes and their quality of life," opting to stay put at a life stage when earlier generations made different choices.
The impact of senior citizens born between 1931 and 1941 staying longer in their homes, Freddie Mac found, has resulted in just over a million housing units that "would have come to market by 2018" but did not. When Freddie Mac broadened the category to include all those 60 and older who have not sold their homes as they have aged, the number rose to 1.65 million houses, the report said.
"The amount of homes retained by seniors is likely to grow as both the number of seniors increases and the barriers to staying in place are reduced," the report added.
Responding to Freddie Mac's analysis, Washington Post real estate columnist Kenneth R. Harney noted that the kinds of homes that senior citizens might be selling are not the homes young buyers seek on a budget. They're too big and expensive because, in many cases, they were not starter homes for that older generation. They may also be too outdated for millennial tastes.
Linking fewer millennial homeowners to seniors aging in place also gets pushback in part because it downplays other barriers young adults face. The Federal Reserve says the weight of student loan debt has played a major role in preventing young adults from achieving liftoff in home ownership.
Anderton agreed. "Millennials want homes. They don't want to rent forever, but they face obstacles. High student loan debt hinders ability to get a mortgage," he said.
The Urban Institute called out how hard it is for young people to save a down payment while paying not just student loans, but high rents. The institute also noted millennials are marrying and starting families at an older age, which likely also pushes back the age at which they want to buy homes.71 comments on this story
Anderton said while it's easy to count how many millennials are buying, the "data on baby boomers is more anecdotal. I do hear from realtors that they aren't selling, though obviously some are downsizing. But they got into their homes at lower interest rates and the rates have kind of crept up. ... Home prices have dramatically increased over five years."
The math isn't particularly appealing for healthy senior citizens when it comes to moving, especially if they would need to carry any kind of mortgage. They might think, "I'm going to sell my nice big home and get a small home at almost the same price, and then I'm going to pay a higher interest rate if I have to finance any of it," said Anderton.