Why Millennials Aren’t Buying Houses Anymore

A surprising shift has happened in homebuying recently. Not only has the housing market gone through enormous changes, but an entire generation is reshaping when and if they buy real estate .

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Multiple studies show millennials are not buying homes as quickly as their generational predecessors. Until recently, the majority of millennials were renters. Even now, only just over half (52%) of millennials reported owning a home. It also took millennials longer than any other generation to reach this milestone. On average, millennials were 34 years old when they purchased their first home.

While some were held back due to affordability, others did it on principle, opting for a “ renter-by-choice lifestyle .” To get more clarity on the issue, we asked real estate professionals to weigh in on why millennials aren’t buying houses anymore . Here’s what they said.

Interest Rates and Wages

One reason millennials aren’t buying houses is simply because the money just isn’t there and the rates are just too high.

According to Daniel Pitner , a real estate agent out of Glendale, Arizona, “The current interest rate environment has made homeownership extremely expensive on a monthly basis. The interest rates are rising at an expedited rate, while wages are not keeping up. This is forcing millennials to rent while they wait out the current interest rate and wage environment.”

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Affordability

Pitner, a millennial himself, said home prices are another issue delaying the generation from buying. “The unexpected real estate boom of 2020 has caused an affordability crisis amongst millennial home buyers. Because of the higher prices on homes, coupled with interest rates, purchasing a home at the median purchase price equals a monthly mortgage price that is unrealistic for most millennials,” he said

John Myers, the owner and broker for Myers & Myers Real Estate , agreed. “Home prices have skyrocketed in recent years and have made it more difficult to purchase a home for millennials. Add to this that mortgage rates are very high compared to recent years.  The combination of high prices and high-interest rates is making it very difficult for millennial home buyers to afford the monthly payments,” he said.

Student Debt

Millennials also have another financial matter that they are dealing with that may be keeping homeownership dreams on hold.

“Let’s say the average millennial could afford the higher interest and higher home prices. They are still crippled by student loan debt which takes away a large chunk of their saving power. And without saving power, they are not able to save a large enough down payment. And without a down payment, homeownership is nearly impossible,” Pitner said.

Myers agreed, “Many millennials have way too much student debt to qualify for a mortgage. Many have so much student debt and not enough income to support a mortgage.”

Lack of Inventory

On top of everything else, in some cases, there just aren’t enough homes to go around.

“Even with higher interest rates and lower demand, there is still a lack of inventory. This means there are not as many homes to choose from.  With this in mind, it is hard for a millennial to wrap their head around paying a crazy high monthly mortgage for a home they don’t love because there wasn’t much to choose from,” Pitner said.

Different Values

Despite all the other issues, millennials might also be avoiding buying homes because they just don’t want to. Many now have different values than the generations before them.

“Millennials have different values than their parents.  While their parent’s generation valued homeownership as part of the American dream, millennials value freedom– freedom to move around at their will, freedom to move to a different city at a moment’s notice, and freedom to not be tied to a 30-year loan,” Pitner said.

Myers also finds that millennials have an alternative view of homeownership, although for a slightly different reason. “Many millennials watched their parents get wiped out financially in the great recession of 2008.  Millennials watched as their parents lost their homes and took a major financial and emotional hit.  This left a horrible impression, and they want no part of owning a home,” he said.

How To Get Ready To Buy a House

If you are a millennial hoping to buy a home in the near future, all is not lost. There are things that may be moving in your favor. Home prices are expected to drop this year , as are mortgage rates. To get house-buying ready, you’ll want to get pre-approved. A lender will review your finances to determine how large of a mortgage you could qualify for. A pre-approval letter makes you a stronger or more qualified buyer.

Spend as much time as possible getting a down payment together. The more money you have down, the lower your mortgage payments will be, which can help you stay on track financially. Also, do your research. The more you do ahead of time, the less of a headache you will have down the road. You will be able to rule out certain houses because they are too far from work or don’t have enough room for a home office.

Take the next six months or a year to get in good financial shape, and then make your homeowning dreams come true.

This article originally appeared on GOBankingRates.com : Why Millennials Aren’t Buying Houses Anymore