Seventy percent of all adult millenials expect to be homeowners by the year 2020, even though many don’t necessarily view homeownership as a savvy financial decision, according to a new study produced for the Urban Land Institute.
The survey of 19- to 36-year-olds provides insight on a generation whose members are optimistic about their own economic futures but are still leery of the housing market almost a decade after the real estate bubble burst.
“The biggest source of wealth for most families used to be the home they owned,” said Stephen Klineberg, founding director of the Kinder Institute for Urban Research at Rice University. “The housing bubble burst, and suddenly all that equity disappeared. This has had an enormous impact on people’s sense of whether owning a house will provide security for the future. There are going to be more renters for longer because of that experience.”
While 92 percent of adult millenials say they expect to own a home eventually, 45 percent disagreed with the suggestion that homeownership is a good long-term investment. Fewer than half had a positive view of investing a large sum of money in homeownership.
The results were included in a ULI-commissioned study of millenials’ attitudes toward housing issues, co-authored by real estate consultants Deborah Brett and M. Leanne Lachman.
There are 78.6 million adult millenials in the U.S., so their attitudes and opinions about housing are poised to have a major effect on the development of the country’s urban places and housing inventory.
“Cities are having to re-imagine how they’re going to meet the needs of a generation that’s increasingly more likely to be urban than suburban,” said Klineberg, who is speaking at ULI’s Spring Meeting in Houston this week. “Millenials want to be in areas with street culture, public parks and shared urban spaces.”
Nearly 90 percent of the adult millenials in the survey said they expect to match or exceed their parents’ economic circumstances. But as the authors of the study note, survey respondents aren’t always good at predicting their own future.
In 2010, the survey found that 67 percent of adult millenials expected to own their homes by 2015. But today, just 26 percent of millenials actually do own their homes. That reality doesn’t appear to have daunted their continuing optimism.
“There’s a real concern that this generation will be the first generation in American history that won’t surpass its parents economically,” said Klineberg, who authors the annual Kinder Houston Area Survey. “Millenials are having difficulty finding the jobs that will pay enough to support a family, and the critical necessity in finding those jobs is access to a quality education, so minority millenials are particularly disadvantaged.”
About half of adult millenials are renters, according to the survey. That’s significantly up from ULI’s 2010 study that found just 37 percent of 18- to 32-year-olds were renters. The 26 percent of adult millenials who own their homes is about 10 percentage points below what ULI found in its 2010 study.
“Those figures suggest that a pause occurred in home buying over the past several years in the face of housing market turmoil, difficulty in qualifying for mortgages, and possibly a more long-term preference for renting among Gen- Yers,” the authors wrote.
Part of the reason for the large number of millenial renters is their career expectations. Of those surveyed, 57 percent said the main appeal of renting is the flexibility of being able to move.
“Sociologists think the average college graduate will have four to five career changes,” Klineberg said. “This is affecting the sense of stability in people’s lives.”
“In the old days, you’d have a traditional family with a breadwinner husband who worked at one career and had a wife at home,” Klineberg continued. “Now you have married people with job opportunities pulling them in different directions. It’s a reflection of the very different world of the 21st century.”
The study also provided insight into the type of housing that Generation Y prefers. While much has been made in the media of millenials’ preference for living in city centers, just 37 percent of those surveyed actually described themselves as “city people.” Another 36 percent called themselves “suburbanites” and 26 percent said they were “small-town/country persons.”
The people who are attracted to downtown living are generally drawn from the two-thirds of households that have no children at home – a group that includes the millenials as well as large numbers of empty-nesters and retirees, Klineberg said. “We are no longer a nation primarily of families and children, and we’ve become a people who are living much longer, healthier lives, and going through a variety of different stages in their lives,” he said.
Klineberg said Generation Y, like past generations, is still interested eventually in having children and moving to the suburbs. But millenials generally expect to find the same type of amenities in the suburbs that they enjoy in city centers. “Urban opportunities and walkability can increasingly be found throughout the metropolitan region,” Klineberg said. “The suburbs are also in the process of reinventing themselves.”