Kelsey Marshall and her boyfriend Chris Eidam, both 27 years old, call the home-buying process "terrifying." But they're clear about one thing: It beats the heck out of renting.
"We're wasting money where we are right now," near Bridgeport, Conn., Eidam said. "We just take our rent and we throw it away. That money doesn't go to anything."
If that line of thinking sounds familiar it's because, contrary to much of what's written about them, millennials have many of the same attitudes toward housing as their parents and grandparents. Most say they want to eventually own homes, and only rent because of financial necessity. They even appear to be choosing more traditional houses in the suburbs over renting or buying in city centers.
So far, so good, for the housing industry – but that's not the whole story. Home-ownership rates are still near record lows, several percentage points down from before the housing bust, even after one of the longest economic expansions on record. Hardly anybody expects them to come all the way back. And that's not because of some new mindset among millennials – it's because of the economy they came of age in.
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For now, realtors are celebrating a small but noticeable uptick in buying among millennials, the country's largest age-group. Nationwide, for two straight quarters, the homeownership rate among those aged 35 and younger has increased.
That's "huge" for the industry, and shows that millennials are "getting back into the game," said Ralph McLaughlin, chief economist at Trulia. "In the long run, we expect millennials to own homes at rates of their parents or close to it," he said. "It's just that they're experiencing headwinds."
But what if those headwinds are here to stay? Rents consume a larger share than they used to out of earnings that aren't growing much, making it hard to save for a down payment. Lending standards have relaxed some; still, young buyers already carrying record levels of student debt can struggle to qualify. Home building has lagged and become increasingly geared toward high-end houses, as wealth skews upward. Perhaps above all, for the generation that's just getting started on careers, job security is a thing of the past.
"You go back 20 or 30 years, people would get a job in their late 20s, early 30s with the idea that they might work there until retirement," said Dean Baker, co-director of the Center for Economic and Policy Research and an economist who studies housing. "People aren't in that boat today."
For young people whose careers will likely require frequent moves from city to city, the math often doesn't add up. Owners have to stay put for some years to recover the transaction costs, especially in regions where prices don't rise much. Tax proposals currently in Congress would reduce or eliminate deductions for mortgage interest and property taxes, further undermining the case for buying.
That's "not necessarily a bad thing," Baker said. "It's good for a lot of people to be a homeowner, but in a lot of cases, you might say someone wants the option – they're in Chicago, New York and they get a good job offer in California or something – you want people to be able to take that. If they are tied to their homes, that's a big commitment."
There are barriers on the supply side, too. Builders all over the country have been shying away from the more affordable homes that millennials favor. That's limiting availability and driving up prices, leaving the market ill-prepared for a large influx of young buyers. Industry analysts cite labor shortages, restrictive zoning laws and materials prices among the reasons.
"The result is that price gains continue to exceed income growth through scarcity," said Rob Dietz, chief economist at the National Association of Homebuilders. "Particularly in that smaller home market, which is the hardest market for a builder to essentially reach and build to these days."
Jessica Feliciano has noticed the squeeze. Every house the 34-year-old has looked at in Hartford's desirable suburbs got snapped up before she could make her move.
"Once a good house comes on the market and it's priced properly, it's gone within like five days," she said. "So if you don't schedule a showing and make a decision basically on the spot, it's gone."
Zoning and associated land costs are especially tough in Connecticut, helping make it one of least dynamic housing markets in the U.S. The state's 169 towns all have different standards, and most have been resistant to building more homes per acre, even though in places where that's been attempted, it's often been a success.
"Every town has their own politics and their own zoning and their own ideas of what they want," said Johnny Carrier, a builder near Hartford, who succeeded with a neighborhood of townhomes in Newington and is looking for opportunities to replicate it elsewhere.
The U.S. housing industry expresses confidence that in spite of all the obstacles, millennials will come round to home-ownership as their life-situations change. While they've been getting married and having children later than their parents did, young adults are starting to cross barriers typically associated with buying.
The number of households is edging up, as the last millennials graduate from college and strike out on their own. When that trend surfaced in 2014, young adult households typically became renters. Last year, more became owners.
"Right now, probably a third of our housing business is young couples coming out of the apartments," said Chris Nelson, a builder in Simsbury, an upscale Hartford suburb. "We really think that that's just the beginning. That over the next three to five years, we're going to see a ton of people coming out of the apartments, buying homes."
Conditions should eventually get easier for those buyers: More homes are expected to come on the market as Baby Boomers downsize or pass on. But it may take a while – and it may be another, yet-to-be-named generational cohort that sees the full benefits.
"In the long run, we're going to age out of the problem," said McLaughlin, the Trulia economist. "That may be, however, another 20 years before that starts to happen en masse."