ST. LOUIS― Getting off to a slow start financially may translate into more difficulty of attaining goals like buying that first house for many millennials. Most U.S. households headed by someone under 35 are renters. William Emmons, assistant vice president and chief economist of the St. Louis Fed's Center for Household Financial Stability, found that the rising cost of higher education, the job-market impact of the Great Recession, and rapidly rising housing prices may be keeping the younger generation out of the housing market.
The key takeaways for this quarter’s Housing Market Perspectives are:
According to Emmons’ report, a majority of the generations born in the 20th century transitioned into homeownership as they moved into middle age. The question is: Will today’s young adults be different? Emmons’ projections for 2019 are based on the Census Bureau’s annual data through 2018.
“As of 2016, the typical household headed by someone born in the 1980s (a millennial) appeared to be seriously behind all previous generations at a similar age in accumulating wealth,” Williams said. “A decline in the apparent income- and wealth-boosting power of higher education, due to a variety of causes, also darkens the outlook for this group.”
In the publication, Emmons explains that those born in 1980 or later were too young to experience the worst effects of the housing bubble and the Great Recession. So, while today’s under-40 group is undoubtedly off to a slow start financially, they do not carry the financial scars that previous generations do. Therefore millennials and members of Gen Z may not be that far away from becoming home owners.