About 50 years ago, young college graduates wouldn’t have guessed their ability to afford a home. Despite the education that forced them into debt, they were assured that their higher degrees would lead to better paying jobs and thus put a decent, secure and affordable roof over their heads.
This cannot be said for today’s millennials (18-34 years old). According to Pew Research, more than 47% of young adults now return home to live with their parents. For more recent graduates, returning home is their only option to pay for their higher degrees.
With the cost of education skyrocketing, many young adults have to give up starting their independent lives until they have paid off their debts. Even the president’s recently announced loan cancellation only taints the deep debt that many students are acquiring. In addition, the labor market does not favor home ownership for young people. Professions like education, nursing and social services pay so little that young adults in some parts of the country have roommates or live with their parents while establishing their careers.
This was even more evident during the 2020 COVID pandemic, as unemployment rates and housing prices soared. Many young people have returned home to protect themselves from economic devastation. According to Pew Research, during the first wave of COVID, 52% of recent college graduates moved away. These are rates similar to those young adults experienced during the Great Depression.
Millennials bring new causes and passions to the table, they are the next generation of advocates, intellectuals and engineers. Yet they are late to the table for long-term financial planning.
With house prices at their highest since 2008, only 48% of young Americans today can buy a home, according to Forbes, about 30% less than baby boomers. The main concern of these young people is affordability. For example, in Ventura County, the average house costs $915,000. That means reaching the median standard of living requires earning well over $80,000 a year. Most entry-level positions for college graduates in California cost $45,000 or less. It’s no surprise that more than 55% of young Californians live with their parents.
But the alternative is renting, and more people are renting than ever. In fact, 34.4% rent nationally. Now you might say, isn’t renting always a good option for people? It seems like a way to gain independence. It’s true. Renting, as a temporary option, makes sense before you buy your permanent home. But renting is becoming the only option for millennials, and that has major implications for credit and retirement planning. Additionally, rental rates in Ventura County are well above the national average.
Through home ownership, people can gain equity, which allows them to borrow against their home in times of crisis or even use it for retirement. Having a mortgage and paying it on time also helps improve credit scores. Today’s job market, coupled with rising house prices, is shutting down and in some cases completely barricading young adults’ access to permanent housing and a solid pension plan.
So what can be done to help this new generation of eager homeowners? Well, businesses, organizations, schools, and hospitals could start by investing more in their employees to ensure that they earn a living wage not just based on rent but also on housing prices. Federal, state and local governments could invest more in affordable housing programs aimed specifically at helping first-time home buyers or recent college and trade school graduates. As a society, we could lobby universities to reduce tuition fees and advocate at the federal level to institute and fund additional debt forgiveness programs across the United States.
Home ownership can change someone’s world. Home ownership also improves our economy. We need to invest in our next generation and help them become owners before it’s too late.
Ashlee Vyskocil attends the College of St. Benedict/Saint John’s University in St. Joseph, Minnesota, where she majored in political science and sociology. She completed a summer internship at Habitat for Humanity Ventura County.