Posted in Industry News
Lack of Affordable Housing Derailing Millennials’ American Dream
According to a recent report from the American Bar, home ownership rates amongst millennials continue to be on the decline, dropping 7.3 percent over the last decade. Unfortunately, this isn’t a huge shock, as the housing affordability crisis worsens and new housing policies aren’t proving effective. But what are the causes behind these issues?
First off, it’s a common case of supply and demand. This was conveyed during NAHB’s 2018 Housing & Economic Outlook, as panelists cautioned that demand will continue to outpace construction due to labor and land availability constraints. Meaning, new entry-level buyers (like millennials) will have to contend with rising home prices and mortgage rates.
Additionally, prices in many of the popular metro areas that millennials are flocking to are exorbitant, forcing young renters to spend a substantial amount of their income on cost of living alone, thus preventing them from saving to buy a house. This combined with higher student loan burdens and lower wages makes attaining the American dream of homeownership a near impossibility.
In response to the affordability crisis in relation to rising student loans, some homebuilders are enacting programs to help millennials get out of student loan debt in order to help them finance a home mortgage (USA Today). However, financial planning experts are warning that these programs are simply swapping out student debt for mortgage debt, thus providing no long-term financial benefits. Though the program’s mission seems to take steps to solve the problem, many are calling its approach questionable.
An issue beyond housing affordability is that when millennials are finally able to purchase a home, many times they are not financially prepared for upkeep, and repair/remodel projects.
One way to prepare is having a substantial amount of savings put away for these residential “big ticket” items. Another is to take the time to choose a home (and what it’s built with) wisely. Value-added products like the LP® SmartSide® trim and siding are durable and protect against harsh weather conditions that could cause the need for more frequent upkeep and spending in the long run.
So, while the general rule of thumb remains that a quarter of your income should go to housing payments/rent, in reality, the economic cards are stacked against millennials across America. In the coming years, millennials who are set on purchasing a home may gravitate to more affordable, less sought-after cities with affordable housing. However, until home purchases amongst millennials start to rise, builders are making business adjustments to service other demographics who have the means to invest in home buying today.
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