It’s well known that the wanderlust generation places traveling as one of their top priorities in life. Most quote-driven millennials won’t admit it, but they probably feel a connection to phrases such as “life is journey, not a destination” or “we travel not to escape life, but for life to not escape us.” Millennials are famous for exploring the world and seeking out inspiring experiences. For this reason, they are more likely to spend their savings on an upcoming trip rather than a down payment or mortgage on a house in the distant future. Millennials are not as active in the housing market as their predecessors for many different reasons. Millennials are either living with their parents or in other shared living arrangements while still trying to pay student debts. They might be saving up to buy the latest smartphone, or planning to book that ticket to an exotic island in Thailand. But, what about investing in long-term projects like owning a property? Is the housing market another thing that millennials are determined to kill? Or, is the housing market killing millennials’ desires to own a piece of land?
Avocado toast and iPhones may make it tempting to stay with mom and dad for a few more years, but delicious food and the latest tech gear may not be entirely to blame. In fact, since the 1980’s, housing prices have been rapidly outstripping the average household income. Housing prices have increased 160% since the 1980’s, while income has only increased 25%. In addition, a general uptick in college attendance coupled with tuition increases means that millennials are racking up more debt earlier than their parents and grandparents did, incurring an average of $34,000 in student debt that will take many years for some to pay back.
Student debt is a huge reason why millennials are in a state of constant debt. According to a study by CreditCards.com, 65% of Millennials (ages 18-36) wonder if they will ever be debt-free. A college degree doesn’t guarantee access to a well-paid job, and wages aren’t rising either. As a result, student loan debts are a major reason why millennials can’t even think about saving to buy a house.
A study released by ApartmentList shows that those students who graduate with debt are only able to save about half as much of a down payment on a home as those who graduate without debt. Not only do these students have less money to put towards a down payment, but they also tend to take about four more years to get their first down payment together. It would seem that a simple solution to this problem would be to skip out on college and get to work sooner. However, this is not the case: millennials without completed college degrees fare even worse than those with student debt.
Increasing costs in higher education, in addition to the increased significance of post-secondary degrees, make obtaining a college education a necessary expense. It serves as an investment in one’s financial future as it increases income potential by improving access to skilled employment opportunities. Based on the sample used in the report, 57 percent of millennials age 22 to 35 with college degrees are currently paying back student loans.
According to a study done in 2017, college students who graduate without student debt need to save for 7.6 years before they can afford to pay 20 percent of the median condo price, versus college grads with debt, who need to save for almost 12 years. But they are still better off than millennials with no college degree; for them, it takes 16.7 years. In pricey, youth-saturated cities like San Diego, San Francisco, and Denver, all three categories of younger buyers will need up to 20 years of saving to begin their journey.
When each group was asked about future homeownership goals, their responses were almost identical, regardless of status. About 80 percent wanted to buy a home in the future. In the end, millennials aren’t so different from their predecessors. Millennials are getting married, starting families and buying homes. Or at least, they would like to. Millennials grew up in a society shaped around the concept of instant gratification, and with the idea that saving for a decade in today’s unstable economy seems unachievable. Maybe traveling the world is not such a bad investment. Maybe, “not all those who wander are lost.” -J.R.R. Tolkien