In today's age, millennials are rising to become the dominant forces in the workplace. But there is one aspect where millennials fail to make a presence, the real estate market.
From 2000-2007, the American economy was thriving with economic growth, low unemployment rates and stronger business. This period of stability resulted in a seemingly successful housing market, with American banks confidently distributing mortgage-backed securities, or MBSs. These mortgage-backed securities combine multiple mortgages in a group to create financial security for investors to buy into. Overall, this arrangement allowed banks to distribute mortgages without losing all their money in the process by committing to individual mortgages, a commitment that could last 30 years or more. With the onset of the 2008 Great Recession in America, the stagnancy of wages caused people to begin to default, or delay their mortgage payments. Following the bankruptcy of Lehman Brothers, America's fourth-largest investment bank, America soon found themselves distributing money into failing investment bank. As America tried to patch the mortgage-caused hole in its economy, other economies around the world were negatively impacted.
With the loss of 7.5 million American jobs due to the recession, American house prices began to fall as more people could not pay their mortgages. Called the "burst" of the housing bubble by some, the housing market began to fail as a whole in 2006. But the unemployment rates of America today still hold millennials back from owning homes. Because the American market is still in recovery, even working wages haven't fully recovered.
When one thinks about millennials and homeownership, "debt" is usually in the same sentence. This isn't a mistake; one of the biggest reasons why millennials cannot own homes is because they are already thousands of dollars in debt.
Fresh with a degree, most millennials are faced with student debt from educational loans. The amount of millennials facing student debt is traumatizing at best. The president and CEO of American Student Assistance, a non profit organization that helps students pay back loans, John Zurick stated that there are "about 54 million millennials in the workforce in America, and roughly 70 percent of them have some student loan debt, which is amazing. That's a lot of people." Because of this, young homeowners tend to remain in their families' homes. In fact, living with parents is now the most common living arrangement for American millennials.
The effect of student debt holds greater consequences for the future of the housing market. Because more and more millennials are living in multigenerational households, less homes are on the market. This low amount of available homes causes home prices to rise even higher.
But is student debt and unemployment the only reasons why millennials can't buy homes? According to some, millennials don't even want to buy homes. Because the world today is an ever-connected hub of highly advanced cities and opportunities, young adults are free to travel around to get the best jobs. Coupled with millennials' hopes of financial security prior to marriage, it's no wonder that young people desire to seek the best careers before settling down. Instead of being stuck to one place with a home, millennials can dedicate themselves to wider possibilities.
While millennials roam the earth for attractive opportunities, the American housing market may need a new approach to attract young homeowners. Because without them, the market may face a harder fall than before.