Generation Renter

Home ownership rates are at a 17½-year low. And the U.S. census shows new renters have flooded the market dramatically since the housing crash. The face of these new renters are two main groups -- people recovering from home foreclosure and millennials, or the under 35 crowd.

“This is basically an economically challenged generation,” says James Hughes, Economist and Dean of the Edward J. Bloustein School and Planning and Public Policy at Rutgers. “The economy has not been producing enough high paying jobs so many millennials are either unemployed, under employed or have jobs which don’t pay sufficient levels to purchase a home.”

Gisela Garcia, 32, says she would like to purchase a home one day, but chooses to rent because of the economy. ”Right now I’m saving for survival – and that doesn’t include a mortgage,” she said. Garcia works for the New Jersey Federal Public Investigators Office, and has been warned that the looming threat of a sequester could result in a lay-off at any time. “Because I don’t know what the future will hold, I just don’t think it would be smart to buy a house right now,” says Garcia.

Since the housing crisis, millennials aged 18-34 showed the steepest decline in home ownership – down 12% since the housing bubble was at its peak. 

Another big reason millennials aren’t buying is because they have so much student debt. “It’s like graduating from college and you’re immediately subject to mortgage payments,” says Hughes. “So you have to make monthly payments on your student debt and that makes it difficult to take on a second debt load in the form of a mortgage.”

It’s also a lot harder now to get a mortgage. A new report by Zillow.com shows that one-third of all Americans will unlikely qualify for a mortgage in today’s housing market because of stricter lending standards. And millennials are getting hit the hardest.

According to the Federal Reserve, the share of young people getting their first mortgage was chopped in half in 2011 from ten years ago – falling from 17% to just 9%. 

“I don’t have enough savings at the moment to even think about putting a down payment,” says Garcia.

According to a survey by Zillow.com and the Wall Street Journal, the average down payment is around 22% - up from the 90s when it was around 20%.

“The vast majority of young renters say they want to own one day,” says Jed Kolko, Chief Economist for Trulia.com. “In a survey that we conducted, 94% of young renters say they wanted to own at some point in the future,” he said.

But that isn’t the case for all millennials. Sean Agnew runs his own concert promotion company in Philadelphia.  He says owning a home isn’t a goal for him right now. “Financially I could buy a home if I wanted to, but right now it doesn’t appeal to me,” he said. “I choose to rent mostly for the flexibility and mobility of getting to live in different places in the city or outside of the city.”

He also said he sees buying a home as a questionable investment at this point in his life and instead chooses to put his money into small businesses.

“Making all the credit sacrifices for home ownership, assuming high levels of debt, changing your lifestyle so you can’t eat out as much or travel… makes it a much less attractive option today than it was historically,” says Hughes.