Would you rather own an iPad or a home? Well, it depends on whom you ask. Most Millennials will say an iPad because a home is too expensive. However, this is not necessarily the case. 

In a recent report titled "Is it cool to own a home," Bank of America Corp, cited the National Association of Realtors (NAR) affordability index to debunk the myth that house prices are out of reach of older Millennials (25-34), a cohort now reaching the traditional home-buying age. (The affordability index is the ratio between median family income and the required income for a mortgage as a function of this median income, home prices and mortgage rates).

Buying a home won't be easy for Millennials: "The gap in affordability between the overall population and young adults has widened over the years. But that said, the affordability index for young adults is still above the historical average for the aggregate, implying that housing is generally affordable," Bank of America reported.

Peaking before the Great Recession, overall homeownership in the U.S. has fallen below 65% to levels not seen since 1965. For those aged between 25 and 34, it has plunged almost to 38%. 

If affordability isn't the big stopper, what is it? Let's look at the reasons so many Millennials are in no big rush to acquire a mortgage. 

Not Married (or Partnered) Yet

In 1967, more than 80% of people 25 to 34 lived with either a spouse or partner. Today that number is less than 60%. The changing dynamic of having children and getting married is seeing Millennials stay at home longer, pushing back the purchase of their first home. The average age of a first-time mom has gone from 21.4 in 1970 to 26 in 2013, according to BabyCenter, an online support group for parenting and pregnancy.

Additionally, people are getting married five years later than they did in 1970. "Life events such as getting married or having children are typical triggers to buying a home. The longer this age group lives with parents or independently, the more homeownership will be delayed," Bank of America said. (See also: Kids or Cash: The Modern Marriage Dilemma)

These changing dynamics has seen the proportion of those ages 25 to 34 living at home or with relatives go from less than 15% in 1970 to greater than 25% in 2015. (Note: On chart, read left-hand axis for stats on "living at home or with relatives" and "living alone with nonrelatives," and right-hand axis for "living with spouse/partner.") 

Or maybe kids are just not willing to miss out on quality home-cooked meals.

Student Debt

What goes up, doesn't necessarily always come down. Just look at the chart below. 

Student debt in the U.S. is nearing $1.5 trillion. In the past decade, it has surpassed both auto loans and credit card debt and has become a burden on Millennials trying to enter the housing market. That same group has also had to contend with stingy wages and raises in much of the job market, putting added strain on paying off those loans. According to the NAR report, more than 50% of homebuyers under age 36 said that student debt delayed their homebuying.(See also: Student Loans: Paying Off Your Debt Faster)

TWENTY Percent!

After the Great Recession, banks were forced to tighten credit and reduce risk. One move was adopting the 20% down payment rule for homebuyers. While the NAR found that housing affordability remains above the long-term average, house prices are rising, and it is taking Millennials longer to accumulate enough cash to put down on a home. "Remember that the bulk of the current 25-34 year old cohort started their careers during the financial crisis and early stages of the recovery, when the economy and labor market were fragile," Bank of America said. 

While mortgage affordability programs may offer loans with lower than 20% down payments, interest rates on these loans will be higher to abate the greater risk of default, which puts many Millennials off taking out a mortgage. Additionally, most of these mortgages will require the borrower to take out private mortgage insurance, making monthly payments even higher. 

The Lure of Bright Lights

Millennials continue to flock to cities. Since 1996 the percentage of Americans 25 to 34 living in city centers rose from 28% to above 35%. Whether it's a social movement or the lure of greater work opportunities, Millennials are moving towards regions with a higher proportion of renters compared to homeowners, pushing up rental prices in the urban centers where they prefer to live. So far, they seem unwilling to commute or own a backyard. "According to BuildZoom, new home sales within five miles of the centers of the 10 most densely cities have exceeded 2000 levels but if you go another 10 miles out, sales are about 50% below 2000 levels," Bank of America said. 

Moreover, much has been made of Millennials and their spending habits in the big cities: new clothes, Amazon Prime, the latest iPhone. However, Bureau of Labor Statistics data debunks this notion with spending distribution data from 2004 to 2015. Expenditure on apparel and entertainment fell 1.4%. The biggest decrease in Millennials' shopping basket: spending on "owned shelter," which dropped 2.6%.  Meantime, spending on rental shelter had the largest increase, rising 3.2%. 

The Bottom Line

Housing prices continue to rise in the U.S., but evidence suggests ownership is not out of reach for Millennials. While some financial constraints remain – student debt and down payments – social changes in how young adults are living have pushed home ownership to record low levels and have seen the average age of Millennials staying at home rise. 

Additionally, data show that the myth of massive discretionary spending on entertainment and meals out is just that – a myth. 


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