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Tim Gurner, 35-year-old Melbourne property mogul, recently bashed the Millennial generation for its frivolous spending habits, stating, “When I was trying to buy my first home, I was not buying smashed avocado for $19 and four coffees at $4 each.” He went on to say that reality TV is a main cause of unrealistic expectations and extraneous spending. “This generation is watching the Kardashians and thinking that is normal - thinking owning a Bentley is normal,” he said.

What Gurner failed to mention in his rant is the $34,000 loan from his grandfather he received to kick start his career, which most Millennials do not have as they begin their careers or home-buying process. The issues surrounding Millennials and homeownership, however, are much deeper than simply spending too much on coffee or expecting to own a designer car in their 20s. (For more, see: Money Habits of the Millennials.)

Why Are Millennials Really Not Buying Homes?

recent study by Fannie Mae and the University of Southern California found that homeownership among young adults (25-44 years old) has dropped by 10% in the last 10 years. The causes of this shift include the foreclosure crisis, a slow labor market recovery from the Great Recession, tighter mortgage credit, limited supply of entry-level homes and long-term social changes such as delayed marriage and childbearing.

The Great Recession rocked the Millennial generation as they attended college, beginning their careers and starting families. It made many Millennials extremely cautious about spending, especially when it comes to extremely large financial decisions like buying a home.

Jo Lennan, lawyer, writer and Oxford scholar, told 60 Minutes how much she disagrees with Gurner’s statements about Millennials' spending. “It has never been harder for young and ordinary people to make a start,” she states. “The dice are not evenly loaded. They are loaded in the favor of investors.”

This generation watched as the housing market bubble burst, which resulted in many of their parents losing their jobs and homes. When you add that to their immense student loans, wages that are not increasing in accord with housing prices and stricter lending standards, it becomes much more financially understandable why Millennials are waiting longer to buy their first home. (For more, see: A Financial Advisor's Guide to Millennial Clients.)

Millennials are often opting to rent long term due to the costs associated with homeownership in today’s market versus those associated with renting. Nobel laureate Robert J. Shiller states that home prices have risen an average of approximately 0.6% every year, and The Washington Post states, “Investing in an index fund has, on average, far higher returns than owning, even after you take into account the costs of renting and the tax subsidies for buying.”

In addition to financial and political reasons for waiting to purchase a home (or never actually purchasing one), the Millennial generation is part of a massive culture shift. The Huffington Post recently reported that the amount of people age 20 to 34 who have never married has risen in every U.S. state since 2000. According to April Masini, relationship expert an author, “Millennials aren’t big on tradition.”

Preparing Millennials for Whatever Future They Desire

It is clear that there is a multitude of reasons preventing Millennials from home ownership. Whether it be that their financial situation is not stable enough to support the switch from renting to owning or maybe they just would honestly prefer to continue renting until they start a family, it is important to have these discussions with your Millennial clients.

Advisors must work with them to ensure their financial plan supports their home ownership dreams or lack thereof, and technology can help show the impact on their financial future of these decisions. By leveraging financial planning technology that not only produces the most in-depth, sophisticated, and precise plans in the industry but also provides 24/7 client access to the information through a client portal, advisors can empower their Millennial clients to reach any financial goal they set. (For more from this author, see: Financial Advice Using the "As-a-Service" Model.)

This article was written by Katelyn Rattray, senior content marketing specialist at Advicent.

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