Student loans are usually the reason why young adults cannot afford homes. Recent data indicated that young adults without college degrees are also less likely to own homes because of lower income. The reason behind their low income is the absence of college degrees.
Andrew Woo, director of data science for Apartment List, said millennials without college degrees can be renting homes for a long time due to their inability to purchase one, the Wall Street Journal reported. College degrees are an edge in the employment world, and not possessing one can significantly lower a person's income. Young people without college degrees also tend to have little support from their parents and family when it comes to getting help for putting down payments for homes.
Millennials Need Years Of Saving
Millennials without college degrees and are living in expensive cities tend to have lower chances of saving for homes as well. In San Jose, California, young people without a college degree have to save money for 48 years in order to place a 20 percent down payment on a house. Even in affordable cities like Austin, Texas, millennials without college degrees have to save for 23 years to make a down payment.
College graduates between the ages of 18 and 34 without student debt can typically put a 20 percent down payment for a starter house in just five years. Those who have student loans, however, cannot purchase homes until they reach 15 ½ years in employment.
Data from the U.S. Census Bureau found that the homeownership rate of people under 35 years old plummeted to 34 percent in the first quarter of 2016. That was the lowest level recorded since 1994.
More Problems For Young Americans
Aside from high levels of student loan debt, tight mortgage underwriting standards and overheating home prices also affect low homeownership rates among millennials, according to a report from CNBC. People aged between 25 and 34 have ownership rates 10 percent lower than the past decade.
Older Americans, however, have high homeownership rates. Household formation is also increasing, but two-thirds of the people are renting.
In 2015, renters occupy around 36.3 percent of households. People in their mid-30's to mid-40's have higher chances of renting homes now than 10 years ago, Forbes wrote. Lawrence Yun, who serves as the chief economist at National Association of Realtors, or NAR, home values are increasing faster than people's earnings. This is the reason why fewer people are partaking in the housing market.
