According to a new Pew Research report, millennials aren’t buying houses or starting their own households, and society is shocked! They’re scandalized that even with millennial unemployment dropping to 7.7 percent, 26 percent of millennials are still living with their parents—a 2 percent increase since the height of the Great Recession in 2010. If jobs are available, the housing economy is recovering, why are millennials refusing to leave the nest?
For many, the answer is simple: There is no spare money for mortgages. The Great Recession’s unemployment rates affected youths the hardest, with rates at 12.4 percent, and millennials are among the last to feel the effects of the recovery. With lesser years of experience (both from being younger and often entering the workforce in lesser jobs due to an inability to be hired) millennials are also more likely to be laid off first. According to a White House millennial report, we’re coping with dramatically lower salaries over our lifetimes, with a difference of 2.5 to 9 percent lower earnings due to starting careers in a recession. If you take this in conjunction with the fact that the average student loan borrower has $30,000 in debt upon graduation, it’s not hard to realize that there isn’t much confidence or cash to put a down payment down on a house.
The New York Times takes it a step further, remarking on the skyrocketing prices of renting and the all-time high in lack of rental vacancies. When cities such as New York, San Francisco, and Washington, D.C., have unaffordable rental options yet also offer a more stable economy to find a job, it creates quite the conundrum for the millennial. They can quickly be priced out of a city, even with a seemingly high wage, due to the absurdly high costs of living. In cities such as New York, even if you can afford the rent, landlords often require a salary guarantee of 40 to 50 percent of your rental price. With average rent within 10 miles of New York being more than $3,000 for a one bedroom, you need a job with a six-figure salary.
Now, how many jobs acquired during a recession with less than 10 years experience pay more than $100,000? It’s little surprise that with apartments being prohibitively priced, if by some miracle they can be afforded, in conjunction with student loans, there’s not much money left over for savings. Without sufficient savings, millennials get stuck in a circle of renting, never having enough to afford a down payment on a house. What’s worse, if they cannot afford to rent, that leaves them with very few options outside of the parental homestead.
Subsequently this trend is affecting the housing sector. While housing is rebounding from the bubble burst in the recession, it will stagnate if the millennial third of the workforce is not purchasing homes. In the New York Times piece, Mark Zandi, chief economist at Moody’s Analytics says, “We need the millennials to start leaving their parents’ homes and start out on their own for the housing market to normalize. This is going to be a problem if it continues.”
Perhaps the Boomerang Generation is inhibiting the economy by not utilizing its status of becoming the largest buying power in America by 2017 for large ticket items such as houses and cars. Yet in many ways, the current economic scenario has created a self-fulfilling prophecy of why more than a quarter of 18 to 34 year olds aren’t leaving and/or are returning to their parents’ homes. While 9 out of 10 millennials aspire to own a home someday, for many it is an impossible dream. But with it being more difficult to qualify for loans, staggering student loan debts (which also lower abilities to qualify for loans), stagnant wages and high rental prices, Mom and Dad’s house becomes the most viable option to be able to save money. There millennials have a better chance (even paying rent to the folks) to sock away money and build a firmer foundation. It’s not so much a failure to launch (though who can blame the generation for being gun shy) but rather their best chance to join in on the American dream.
Unfortunately, the entry point to accessing that dream is so prohibitively high now that for the millennial generation, it might end up being unattainable. The new face of what it means to be successful might no longer be measured by the white picket fence, new car in the driveway and a growing 401K. When 30 percent of the population has been burned by an economy that overspent, over-inflated and then burst, they’re unlikely to put their savings (if those exist) or their faith in those institutions. This skepticism is manifesting itself in the different priorities of the generation: entrepreneurialism over climbing the corporate ladder, social good over profit, connected urbanization over suburban sprawl. It’s the same generation that is putting off marriage and children, and it’s not hard to see the root cause of any of these actions. There is distrust that the system in which millennials came of age is stable enough to build a foundation for the future.
Millennials are a frugal and hesitant generation willing to forsake the rigid path to American success because they’ve seen that it is a lie. As the most diverse generation in America is realizing that if even the white educated middle class is failing to flourish, the system is officially broken. If the most historically privileged socioeconomic class is living amongst their parents, unable to afford rent or mortgages, than those with less innate opportunity have an even higher uphill climb. The fact is, for millennials, there’s been a generational-wide realization that success and societal norms cannot come in a one-size-fits most-package anymore because for nearly 75 million people, that American dream is a suffocating fit.
So perhaps society should be a little less scandalized at those kids living in their parents’ basement and spend a little more time focusing on how to fix the system that put them there.
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