DENVER—Why is home ownership declining among young adults, and is the American dream of home ownership still alive for those entering that phase of their life?
Lisa Servon, professor of city planning at the University of Pennsylvania questions a Filene Fellow, tackled both those issues during the Filene Research Institute’s Big.Bright.Minds. meeting here.
“Why is homeownership declining among young adults? Two reasons,” according to Servon. “Really, one is the recession. And the second is this lagging transition to adulthood. And these two things are linked.”
Compared to earlier generations, Servon said that many Millennials have gotten a slow start on home ownership.
“Many Millennials came of age and entered the workforce facing the height of an economic recession,” said Servon. “Many of their or life choices, future earnings and entrance to adulthood have been shaped by the recession. So, is the American dream of homeownership still alive?”
It's difficult to answer, with Servon pointing to the average amount of college debt seniors have when they graduate, a figure that continues to rise.
“And we're seeing lower credit scores among those with student debt,” she noted. “We’re seeing more young adults opt out of the homeownership, and the American Dream. For some people, they’ve just given up.”
Servon emphasized home ownership is less important to Millennials and Generation X.
“And it's not clear if that's because they believe it's a less important part of their value system, or whether they feel like it's just unachievable,” Servon said.
Meanwhile, Servon pointed out younger adults are delaying getting engaged or married, compared to previous generations.
Another Roadblock
“But student debt is also hindering the progress of young adults in other ways,” she said. “The relationship between student debt and getting married—that's one sign that this group is moving more slowly toward independence than earlier generations.”
But there are other indicators of changes in the choices and habits of young adults today, Servon continued.
“They are less likely to be employed full time, married and have children,” she said. “We're seeing that parents are worried about their adult children. Adult children are also worried about their parents. Many Millennials are now concerned not only about their own future, but their parents’ futures as well.”
One Young Woman’s Story
Servon pointed to one young woman she recently interviewed who said she’s feeling overwhelmed and scared.
“She didn't have any support system. She put herself through school—undergrad and graduate. She had to do everything to pay for this crazy expensive education, and then just the cost of living,” Servon said, adding the young woman is also concerned about her mother. “She said her mother has no type of retirement, no type of savings. She gets paid really bad now and she's always struggled.
“So, she's trying to make a future for herself, and is worried about her adult parent,” continued Servon. “Meanwhile, parents are saying that the thing they worry most about is the financial state of their adult children.”
‘New Ways of Thinking’
Servon said she hopes credit unions understand what many young adults are facing as they move toward independence and the possibility of owning a home. She added she hopes credit unions can develop “innovations” to assist young adults.
“Some new ways of thinking, and come up with some ways of serving them that might feel a little bit outside the box,” she said.