Housing Is Perking Up, But Realtors Worry About Young Buyers
The U.S. housing market is strengthening after a tough winter, according to economists at a Realtors convention in Washington.
But even as the short-term outlook brightens, they remain worried about a long-term problem with "missing" young buyers.
"There really are serious issues in the first-time-buyer market," Eric Belsky, managing director of Harvard's Joint Center of Housing Studies, told the National Association of Realtors on Thursday.
He estimates that nearly 3 million more young adults are living with their parents compared with 2007 — before the Great Recession had settled in.
Many would like to strike out on their own now, "but their incomes just aren't high enough to make it work," Belsky said. "You have a very stressed group in their 20s."
Lawrence Yun, chief economist of the National Association of Realtors, said the trade group is expecting "steady improvement" for the housing market through 2015, but agreed that for many would-be buyers — particularly younger ones — getting a mortgage "is still tough."
One decade ago, the homeownership rate for young adults under age 35 was 43.6 percent. Today, the rate is just over 36 percent, according to U.S. Census data.
Most analysts cite four key factors keeping many younger people out of the housing market.
First, millions are not finding jobs, or at least not the kinds of jobs that pay enough to save money for a down payment. The employment rate among Americans aged 20 to 24 slipped to just 61 percent in 2011 — in the wake of the Great Recession — compared with 72 percent in 2000, according to a Brookings Institution study.
Convention attendee Jim Simmons, a Realtor from Olympia, Wash., said he has seen the fear of losing a job — or the hunger for a better one in another city — make young people reluctant to put down roots.
"They don't want to be tied down," he said. "They don't know where they are going to be next year."
And that leads to the second problem: Young people also are delaying getting married and starting families — events that traditionally spur the desire to own. The median age for men to marry is now nearly 29, compared with age 25 just three decades ago. Women typically get married at nearly 27 years old today, compared with 23 years old in the early 1980s.
The third obstacle involves low credit scores. Many younger Americans look bad on paper because they have missed payments on credit cards, car payments or student loans. The Federal Reserve Bank of New York says student loan default rates have soared from just over 6 percent in 2003 to nearly 12 percent last year.
"Getting a mortgage is always a humbling experience," said Nancy Riley, a Realtor from Clearwater, Fla. But since the financial crisis, it has become even tougher to get a home loan, she said.
And the fourth factor is that even for young people who have made all of their debt payments and have kept up a good credit score, they simply can't take on more debt. They already have maxed out because they are carrying huge student debts, which collectively add up to $1.1 trillion.
"When I talk to younger people about buying, the first thing I ask about is their student debt," Riley said. Those college loans are often a deal breaker, she says.
The Fed study concluded the homeownership rate may not bounce back for a long time for younger people because of "growing student debt balances, limited access to credit, lowered expectations for future earnings, and perhaps even a cultural shift" in favor of staying single longer and renting.