Despite improving housing market conditions, young adults today are hesitant to become home buyers, further hampering the economic recovery, Bloomberg reports.
Even Sara Stevens, the 27-year-old daughter of Mortgage Bankers Association CEO David Stevens, says she’s not buying anytime soon.
“I watched cousins and other family members go through pretty tough situations in 2008 and 2009,” Sara Stevens tells Bloomberg. “I can’t tell you how many of them [my dad] tried to help get out of bad mortgages.”
Stevens and other millennials watched on the sidelines as family members experienced the effects of the collapse of Lehman Brothers, which triggered a financial meltdown six years ago. Because of this, Bloomberg reports, many young adults are more risk averse and view the potential upsides of status and wealth more skeptically than people did before the crisis, altering the homeownership calculation.
But now seems to be a prime time to invest in a home. Bloomberg data shows that from 1984 to 2014, interest rates have decreased from 13.9% to 4.1%; first-time buyers affordability index has increased from 64.9 to 116; mortgage payments as share of income has decreased from 28.2% to 14.2%; and unemployment among 24- and 25-year-olds has decreased from 7.9% to 6.9%.
Despite the favorable conditions, first-time buyers only make up 27% of the market, when historically the percentage has been closer to 40.
Uncertainty and doubt currently overshadow Millennials’ desire to become homeowners — what was once considered to be the “American Dream.” But until they decide to take the plunge, the housing market won’t quite recover.
“Without first-time buyers, current owners have a harder time selling and trading up, depressing the market and dragging down the economy,” Bloomberg writes. “U.S. homeownership fell for the ninth straight year in 2013, to 65.1 percent, according to the Commerce Department. The MBA is projecting sales will decline for the first time in four years.”
Read the full Bloomberg article here.
Written by Emily Study