It’s been eleven years since the US mortgage crisis, and in those eleven years the housing market has changed. A certain generation have come to hold the largest (34%) share of that housing market. This generation of young adults are called millennials. There’s no official say on the exact age range, but generally we can consider young adults around 20s-30s as millennials. In the following paragraphs we’ll get a closer look at how this group of socially conscious, self-confident, and collaborative people are choosing to live.
The Prodigal Son Returns
Let’s start with the basics; who are millennials living with? They may not be happy to hear the answer. A US Census report found that in 2016 “More young people today live in their parents’ home than in any other arrangement. 1 in 3 young people, or about 4 million 18-to 34-year-olds, lived in their parents’ home”. As a millennial who is currently in this situation, I feel their pain. Besides shacking up with Ma and Pa, millennials are next most likely to live with their spouse (27%), followed by nonrelatives or relatives that aren’t parents (21%), an unmarried partner (12%), or finally, alone (8%). Check out these differences between the lay of the land in 1975 and in 2016 in the figure below:
So why are millennials living at home with their parents, spouses, or roommates instead of alone? It’s all about the cash. Home prices are higher by 30% since 2010 and rents are higher by 20% while hourly earnings have only increased by 15%. In major ‘Job-hub’ cities that millennials are drawn to, such as New York, Chicago, or San Francisco, rent can climb up to 50-100% more compared to other areas. Despite this, millennials can be found in these cities paying 40-60% of their income towards housing. Add the cost of expensive living options onto an already debt burdened generation ($25,000 to be exact for 46% of home buyers 36 or under) and it’s easily understood why many millennials return home.
Buying or Renting?
Moving on from that uplifting news, let’s look closer to see if millennials are renting or buying. As I read through articles I noticed a lot of buzz from realtors proclaiming a bullish housing market, driven by the coming of age millennials. But what are the facts?
This was not baseless hype. According to a report from the National Association of Realtors, people 36 years and younger were the largest generation of home buyers, claiming 34% of the market. Who are these home buying millennials? With a median age of 31, 66% of them are married couples, and 49% have kids, which would explain why they need the room.
So far we’ve discovered that about 1/3 of millennials live at home, but the millennials who are buying houses are making up 34% of the market. Let’s not forget another category of housing; renting. It turns out that in 2017 a millennial who headed their own household had a 65% chance of renting. What this all means is that when millennials do leave their parents’ house, they’re mostly renting. But for those who do choose to buy a house have enough capital to seize 1/3 of the market.
There are several reasons why a millennial would choose to rent. But there are other reasons to rent, like having privacy. Millennials generally are reluctant to make major commitments during this young stage of their life, for example many are delaying marriage or having children. Renting lets these young aspiring adults to hold off on big decisions while also testing out a location before jumping into a long-term mortgage.
Overall, millennials are a diverse generation of people; from college students to experienced professionals with families. A lot of younger millennials may return home to gain a steady foothold before venturing off, or maybe they’ll be renting overpriced apartments in big cities. But older millennials who have established themselves and have started their families may be looking for a home to settle down in. Regardless of their housing situation, one thing’s for sure; millennials can’t be put into a box.
Millennial Innovation Council
The following article was submitted on behalf of Capgemini NA’s Millennial Innovation Council (MIC) Employee Resource Group (ERG). The mission of MIC is to engage all employees to strategically position Capgemini in raising its future generation of talent in a changing business environment and an evolving world. By understanding the living situations of millennials Capgemini is putting themselves in a position to attract and retain talent.
This article was written by Scott Smith. Scott has worked at Capgemini for a little over a year as a business analyst in the NA FSSBU, specifically with insurance. After graduating, Scott, like other millennials, moved back into his parent’s house. He looks forward to sharing more interesting articles