For years, it’s been difficult for millennials to catch a break, especially when it comes to being able to afford a home. And it’s only getting worse in 2021 for that generation, comprised of individuals born between 1981 and 1996. Some have claimed that millennials don’t want to own a home, and are satisfied with renting. Nothing could be further from the truth—a whopping 89% of millennials say they want to own a home. They just can’t afford it.
Many millennials were just entering the workforce in 2008 when the financial recession sent the American economy tumbling. This turned out to be only the first of many crises that have marked their adult economic lives. Millennials have also been the hardest hit by the student debt crisis, with millions unable to pay off their student loans fast enough to begin saving for things like having children and retirement. Then the COVID-19 lockdowns again upended lives and killed jobs, right when many were beginning to get back on their feet. Now, as the country struggles to recover, ill-advised economic policy from the Biden administration and the resultant spiraling inflation have made it increasingly difficult for millennials to realize the American Dream of being able to buy a home.
The National Association of Realtors (NAR) tracks home prices in 183 metro areas across the country. As of early August, in all but one of those areas, home prices were higher than a year ago. In 94% of them, median prices rose by more than 10% from the previous year. Nationwide, the median single-family existing-home sales price rose 22.9% from a year ago to $357,900—the highest price since records began in 1968. Most of the increases have taken place in the southern and western portions of the country. But some localities experienced even greater increases in prices, such as Pittsfield, Massachusetts (46.5%), the Austin, Texas metro area (45.1%), and Naples, Florida (41.9%).
A recent lumber shortage has been a major driver of the crisis, with overall prices jumping by nearly 200% since April 2020. But despite the fact that lumber prices have finally begun to stabilize, housing prices continue to rise, and the U.S. is desperately short on homes; Freddie Mac recently estimated the number to be 3.8 million, but the actual figure could be higher. There have been twenty times fewer homes built in the last ten years than any decade since the 1960s.
Homebuyers are feeling the pinch. According to a survey by Fannie Mae in July, only 28% said it was a good time to buy a home—the lowest number going back to 2010. Nor are the record low interest rates alleviating the pain of higher prices. During the second quarter of 2021, the average mortgage payment for a single-family home rose nearly 17% from a year ago, going from $1,019 to $1,215.
A good deal of the rise in prices is being driven by cash purchases of homes, leaving those without large cash stockpiles in a more difficult position, which includes many millennials who are still in the early stages of their careers. The NAR reports that half of existing-home buyers who used mortgages put at least 20% down—which has only happened three times over the last decade, and all three times occurred since last fall. Moreover, FHA loans, which usually help first-time homebuyers, accounted for only 10% of home purchases in the first quarter of 2021, the second-lowest percentage since the housing and financial crash of 2008.
What does this all mean for millennials? It means far fewer of them are able to purchase homes than previous generations.
Even before the pandemic, millennials struggled to purchase real estate due to rising prices and the prevalence of student-loan debt. As late as 2019, 69% of millennials said they couldn’t afford a home. As of 2019, first-time homebuyers paid 39% more than first time homebuyers nearly 40 years prior, with only 13% of millennial renters expected to be able to afford the traditional 20% down payment within the next five years.
That was all before COVID. The record inflation and rise in home prices has made it even harder for millennials to get ahead. Just as millennials were beginning to recover from the worst economic and housing crisis of the 21st century, they got hit with another hurdle thanks to the Biden administration’s runaway spending plans that are further fueling inflation. The record demand for homes has caused some homebuilders to put a pause on building more homes as they race to complete the ones they’ve already committed to, exacerbating the housing crisis even further.
To make matters worse, the Biden administration is going after the suburbs and single-family housing that have been the pathway to home ownership for generations.
Owning a home brings stability, independence, and a degree of self-respect that all Americans should have the opportunity to earn if they work hard and save wisely. Homeownership also encourages people to be more invested in their communities, strengthening the country as a result. If an entire generation—the largest so far in American history—cannot afford to purchase a home, the consequences could be disastrous, making economic uncertainty the new normal and threatening the very existence of the American middle class.
It’s not an accident that millennials are much more open to socialism than past generations. With skyrocketing costs of living—preeminently in housing costs (a basic necessity)—there is a generational sense among millennials that the “free market” is not working for them, which would justify using the power of the state to make up for such “failures.” If the housing crisis persists, not only millennials, but the rising Generation Z could find themselves much more willing to depend on Uncle Sam than on a “free market” which, for them, has proven anything but dependable.
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