In the United States, only 31% of millennials thinking of buying a home actually plan to do so within the next two years. While minimal, this small percentage is perhaps a miracle in the modern housing economy what with 75% of Americans living paycheck-to-paycheck and 27% having limited to no savings at all.
However, the future of American housing market isn’t only relying on the decisions of millennials (those born between 1982 and 2004), but specifically Latinx millennials.
According to a study by the Joint Center For Housing at Harvard University entitled “The State of the Nation’s Housing,” three-quarters of the gains in the American housing market are driven by minorities.
“The fact is the majority of Latinos want to be home owners and will make up half of all new home buyers in the next 20 years,” said Scott Astrada to NBC News. Astrada serves as the director of federal advocacy at the Center for Responsible Lending. “They have a central place in the housing market and finance system.” But despite that central place, many Latinx millennials are unable to find affordable housing.
“We’ve been talking about buying a house, but right now it is beyond our possibilities in the L.A. market,” said Michael Alfaro, a 29-year-old marketing freelancer. Despite being recently married, Alfaro and his wife continue to live in a rent-controlled apartment in Los Angeles. “We make more than the average American, but there is no way, even with that, we could afford a house. Getting into that kind of debt for us is scary.”
NBC News reports that home buying is on the decline for millennials more than any other age group. However, Latinx millennials in particular have seen a greater decline in previous years. “About 51 percent of 25-to-34-year-old non-Latino white millennials owned homes in 2013,” reports NBC News, “compared to 27 percent of Latinos…”
According to Astrada, Latinx millennials are starting from a negative, not just from scratch due to the recession wiping out approximately two-thirds of wealth in the Latinx community. Fortunately, despite this drawback, the rate of home ownership is growing among Hispanics.
The reason behind the growth in home ownerships is estimated to be due to the growth of the Latinx population, which has a younger age group than other ethnic populations in the United States. Many Latinx are also becoming leaders in household formations as their share in the workforce grows.
For Pamela Cervera, a 30-year-old senior manager for development at LULAC, owning a home was a goal from the start. As a child, she lived in a two-room apartment with her parents who had immigrated to the United States from Mexico. The apartment was shared by another family with three children. When Cervera was 13, her parents purchased a condo and in kind Cervera now lives in her own condo with her boyfriend in Washington, D.C.
However, the process to get there was slow and steady. Cervera saved money through college, attending state-level undergrad in order to stay out of debt before moving out of her parents’ home at the age of 29. Even now, Cervera and her boyfriend rent out one of the two bedrooms in the condo in order to help cover the $369,000 mortgage, paying rent at an average of $2,695 a month.
“Right now, I have about four friends who are my age and they are actually in same situation… (they are) purchasing a condo with someone they are not married to,” Cervera said to NBC News. “It’s starting to become a trend.”
Yet the trend still seems frightening for Alfaro who, despite having multiple real estate apps on his phone, says he knows buying a house right now isn’t possible. “We’ve grown up knowing we shouldn’t have any debt,” said Alfaro.
Alfaro came to the United States on a work visa before becoming a legal resident. He studied at Chapman University with money saved for him by his parents in Guatemala.
Alfaro told NBC News,
“I’m an immigrant … I didn’t have anything that I thought I could rely on to help me out so really having that money in the bank account was better than owning a house. I can send money home to my parents still. That’s something I do every month. If I buy a house, I won’t be able to help my family back home; that factors into the situation we are in.”
Paying for a mortgage isn’t the only expensive part of owning a home, either. In the United States, homeowners pay up to $270 a month in utilities and in the United States air conditioners use 5% of all electricity produced during the Summer months.
The expensive prices behind mortgages and utilities is what has the housing market as low as it’s been since 1994. Therefore, says Scott Astrada, it’s essential that the Latinx community see an increase in wealth in order for the housing market to grow.
“If Hispanic millennials don’t see an increase in buying, there is a potential to jeopardize the housing market and everything tied to it — economic security, wealth building and all that that entails,” he said.
But before Latinx and Hispanic millennials can buy homes, they must first see a reason to buy them. According to Business Insider, the biggest obstacle for millennials when it comes to home buying is the initial down payment, which typically makes up 20% of the house price. That means in order to invest in a house such as Cervera’s condo with a mortgage of $369,000 there would need to be a down payment of $73,800 which, for some millennials, is the price of their student loan debt.
Because of this, apartments are seen as more feasible housing options for millennials. In 2013, approximately 86% of American workers commuted by automobile. This is true of students as well as workers who typically utilize public transportation or vehicles to commute to work or universities from downtown apartments that are in their price range. Owning a house located outside city areas may make it more difficult to commute and more expensive in terms of gas affordability.
“We believe the delay in homeownership is due to tighter credit standard and lifestyle changes, including delayed marriage and children,” said Michelle Meyer, a US economist at BAML, to Business Insider. “We do not expect these factors to change in the medium term, keeping the homeownership rate low for young adults.”
Therefore, it isn’t only the wealth of the Latinx community that may need to change in order to sustain the housing market, but also a lifestyle shift in millennials in general. Yet a lifestyle shift may be difficult, if not impossible, as the United States continues to recover from the recession and it may take several generations before the lifestyle of Americans adequately benefits the housing market. Perhaps then the solution lies not with a lifestyle change in millennials, but a millennial change to the housing market.