Life looks different for millennials. Rather than rushing out to get married and buy a home as previous generations seemingly did, today’s crop of young adults are taking their time. The median age for a first marriage has been steadily increasing since the 1970s and currently sits at 27 for women and 29 for men, according to the Census Bureau.
[See: 10 Retirement Planning Moves to Make in Your 20s.]
Not only are they marrying later, but some studies point to millennials resisting the idea of settling down with a home of their own. Bankrate.com surveyed 2,002 adults and found 44 percent of non-homeowner millennials say they simply don’t want a house right now. “We didn’t ask why, but there’s a lot of good guesses,” says Holden Lewis, senior mortgage analyst and editor for Bankrate.com. Those guesses include the later start to marriage, an increasingly mobile society and mounting student loan debt.
Another reason is the one given by the majority of non-homeowners surveyed by the National Association of Realtors. Of 3,230 student loan borrowers, 71 percent told the association their debt had hindered them from buying a home. What’s more, 42 percent of young millennials say student loan debt is preventing them from moving out of a family member’s house.
While these statistics seem to point to millennials being a generation that will rent rather than buy, not everyone is convinced.
Millennials may be no different from other generations. Homeownership is on the decline for millennials, but that’s not a trend unique to young adults. After peaking about 10 years ago, annual homeownership rates across all generations have been declining. It’s a phenomenon that can likely be attributed to the housing market collapse that led up to the 2007 to 2009 recession.
Even with this post-recession dip, millennials still own homes at roughly the same rate Gen Xers did more than 20 years ago. According to Census data, 34 percent of those age 35 or younger owned a home in the first quarter of 2016. Meanwhile, 37 percent of young adults were homeowners in the first quarter of 1994.
Some in the mortgage industry say they haven’t seen any change in the number of millennial applicants either. In fact, institutions may even be experiencing an increase in young borrowers. “We’re seeing millennials buying more and more every year,” says Dave Skaff, a group vice president for M&T Bank.
[See: Rental Rates on the Rise: What to Expect in 2016.]
Current renters may be making a costly mistake. A third of millennials may own a home, but that still leaves a significant number renting or living with a family member. While those young adults may not have as much money tied up in their living arrangements as homebuyers, they could still be setting themselves up for financial peril. Less than a third of 18- to 29-year-old renters have insurance to cover their belongings and liability, according to an InsuranceQuotes.com survey of 1,000 adults.
“I think we can chalk it up to a lack of experience,” says Laura Adams, a senior insurance analyst at InsuranceQuotes.com. Millennials may think that since they have few valuable possessions, renters insurance is unnecessary. However, policies also cover personal liability and may pay for a hotel should a renter be displaced. “If you have a party and someone is injured … it will cover you in the event of a lawsuit,” Adams says.
Not only may millennials misunderstand renters insurance, but they may also be overestimating its cost. Adams says the average policy costs less than $200 per year, but a quarter of the surveyed young adults told InsuranceQuotes they thought coverage would cost at least $1,000.
[See: 10 Ways Millennials Are Changing Homebuying.]
Homeownership may be within reach. Of course, not all millennials want to stay renters. For those who aspire to homeownership, mortgage experts say getting a loan may not be as hard as they think. “A lot of people say they can’t afford a down payment,” Lewis says. “But you can get an FHA loan with 3 percent down. Three percent on a starter home is not a whole lot of money.”
Financial institutions are also working to make mortgages more accessible to younger borrowers who have limited credit histories. Skaff says M&T Bank looks for alternative ways to gauge a person’s credit worthiness. For example, the bank may consider someone’s mobile phone and cable payment history if needed. “It’s a little more difficult, but it’s certainly doable,” he says of mortgage lending for millennials with minimal credit. Having a car loan or credit card to boost one’s credit score can help, although it’s not always necessary.
Ultimately, Skaff says the important thing for millennials to remember is to avoid overextending themselves when applying for a loan. “The biggest piece of advice to give anyone is to live within your means.”
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Are Millennials the Renter Generation? originally appeared on usnews.com
