The lack of confidence in the US real estate industry is apparent across the entire country. Even recession proof areas such as Washington DC are experiencing some slowdown. Some analysts have placed faith on Gen Y, the echo boomers, to be the saving grace of the market.
Gen Y has close to 80 million in population which makes up a little more than a quarter of the total population. They are coming of age to be prospective real estate owners as well. Will they be the fuel for the next real estate boom? Don’t count on it.
Unlike previous generations, the millennials have a different set of issues, priorities, and lifestyle choices that may delay their entrance into the real estate market, causing the hopeful recovery of the housing market to be a bit further down the road.
Unlike previous generations, Gen Y is starting with an increased amount of debt. College tuition costs around $7000-$26000 a year not including books, housing, and other bills, placing many of our young professionals in surmounting debt. The average college graduate is graduating with $20,000 debt for tuition and $3000 on the credit card, with some racking up close to, if not surpassing $100k for a bachelors.
For some graduates, this amount of debt is offset by satisfying salaries averaging in the low $50k/year range, but they are also concentrated in high cost of living areas such as Washington DC, Seattle, Boston, Philadelphia, etc where average home prices are easily a quarter million or more.
Obviously these homes are priced for couples and not really the young urban professional, and with marriage rates at a low, and divorce rates common, it might make more financial sense to echo boomers to rent instead of buy. These potential buyers are doing well in an otherwise struggling economy, but not with the type of purchasing power to enter the real estate market. Many are finding it more beneficial to rent, pay down debt, and/or live the high life with iPhones, car payments, and stashing money in a 401k than to consider real estate.
Don’t worry though – the echo boomers will eventually look to buy after paying down debt, settling down with a significant other, getting a few promotions, and coming up with the money for the increasingly difficult down deposit. Just don’t expect it to happen anytime soon.