The housing market is back--with the exception of one demographic that happens to be buying homes at historic lows.
Buyers ages 18 to 35. AKA, millennials.
In fact, for the first time in 130 years, the most common housing arrangement for individuals ages 18 to 35 in the United States is living with their parents.
Here are a few of the reasons why millennials are staying away from the housing market.
1. Millennials are scarred by the housing crash.
My family owned two homes when I was a child. Their first home was foreclosed on when I was around five years old, after my dad lost his job. My family's second home - a home my dad built with his own hands - was also foreclosed on when I was 18, after my dad lost another job.
The loss of that second home was something my parents were never able to recover from.
Because of these losses, and the way they affected my family, I was terrified of buying a home. In a way that terror was a blessing, because it helped keep my wife and me from getting a mortgage we couldn't afford during the boom years that led to the housing crisis. My fear of buying a home was a direct - if not always rational - response to what I saw my parents experience.
And seeing the impact of foreclosure on people you care about is something many millennials can relate to.
"The psychological impact of the housing crash on the millennial market is something that can't be overlooked," says Bryan Bowles, President of Worth Clark Realty, and at 35 technically a millennial himself. "This generation has trust issues when it comes to the housing market--and with the people and institutions who sell homes and finance those purchases. Rebuilding that trust is something we in the industry have to consider when working with millennial buyers."
2. Millennials start life buried in student loan debt.
It's completely logical to be cautious about obtaining a mortgage when you begin your adult life with the equivalent of a first mortgage, in the form of student debt, already on the books. And while the average student loan debt isn't quite that large, the reality is that most students already face a historic long-term financial commitment right as they start their career.
While home purchases among 18- to 35-year-olds are decreasing, student loan debt is skyrocketing. The stereotype of the millennial who refuses to grow up and move out of their parents' home should be replaced by the reality of 18- to 35-year-olds that have had to delay or forego home loans because of student loans.
3. They face an uncertain economic future.
What will the future look like five years from now? 10 years from now? 30 years from now? How will increasing automation and globalization affect the labor market? What will our politics be like, and how will that impact our economy? Will artificial intelligence significantly reduce the number of jobs available to humans?
Millennials--like everyone else on the planet--do not know the answers to those questions. Given that, it is completely reasonable to approach a 30-year financial commitment like home ownership with caution.
In my experience, very little of the dialogue about millennials makes any attempt to identify why millennials perceive the world the way they do. In the case of the housing market, it makes sense for a post-crash generation of first-time buyers to be cautious.
And given the importance of the housing market to the overall economy, it makes sense for policymakers and financial institutions to take millennial concerns seriously.