It’s No Rocket Science Why Millennials Aren’t Buying Homes
Millennials aren’t buying homes – it’s not the latest news. This has almost become a norm. However, people have different opinions when trying to find the reason behind this tragic situation. The older generation blames the millennials for their lack of financial prudence. The millennials themselves point to the steep rise in housing prices behind their inability to buy new homes.
Such discussions always lead to biased sentiments taking over logic and data. Let us analyze the data available to us and examine in an unbiased way the reason behind millennials’ inability to buy new homes.
The trend of Average Sale Price of United States Homes
The two dark years of the pandemic triggered an exponential increase in housing prices in the following years. The average price of a new house started increasing rapidly from 2021 onwards, and the trend is in no mood to stop in 2023.
Back in the 90s, the average housing price hovered around $150 thousand. Then came the real estate bubble in the 2000s. The prices increased by a whopping 21% in 2005, with the average housing price reaching almost $300 thousand. Then the bubble burst and the prices came down to $250 thousand.
The prices remained somewhat from 2015 to 2019, with average prices hovering around $370 thousand. The pandemic in 2020 triggered a bloodbath in the real estate sector, with housing prices shooting up to $460 thousand in 2021 and $543 thousand in 2022.
As we can see from the data above, it has become practically impossible to buy a new house after this exponential increase in prices. It makes no sense to buy a new house now.
The situation looks grimmer when we further compare the disposable income the millennials have with the same that the Gen-X had.
Statistics of Mean Disposable Household Income – Millennial Vs. Gen-X
It’s quite concerning to see that despite the rising inflation, the mean disposable income of the millennial household is lower than that of the Gen-X household.
While the Gen-X household enjoys a mean disposable income of $102,512, the millennial household is languishing at $84,563.
If you think it is logical for Gen-X households to have more disposable income since most Gen-Xers are now on the higher rung of the professional ladder, then it would be useful to look at the trend of income inequality. From 1990 till this date, the income of the highest-earning individuals has exponentially increased, while the income of the people in the bottom rung has decreased exponentially.
Data from National Equity Atlas shows that people belonging to the highest-earning group(90th percentile) saw their income increase to $119,000 in 2019 from $98,618 in 1980. On the other hand, the income of the people belonging to the bottom rung (10th percentile) has decreased from $24,633 in 1980 to $21,000 in 2019.
We aren’t cherry-picking the data. Apart from the 80th and 90th percentile groups, the 10th, 20th, and 50th percentile groups – all saw their income decrease steadily over the years. Here’s the link to the data.
It’s this income inequality that is exacerbating the already-chaotic situation.
Millennials Are Earning Less Than What Their Gen-X Counterpart Earned When They Were of the Same Age as MillennialsAre Today
Here are more stats for you. Today, millennials’ wealth accounts for just 4.% of the entire US Wealth. Gen-X and baby boomers- together capture 78% of the US Wealth.
The problem is, as per the CNBC report, during 1989, baby boomers were of the same age as millennials are today, and they captured 21% of the overall US wealth. Compare this figure with the measly 4.6% of wealth captured by today’s millennials. This poignantly shows the wealth gap that millennials are suffering from.
It is in this situation that the millennials’ inability to buy a new house should be analyzed.
What Millennials Need
Millennials don’t need data to know that they can’t buy a house. They already know this on a first-hand basis. What they need, at the very least, is empathy from their Gen-X counterparts. Every day, on social media, millennials rue that their parents, bosses, and other old acquaintances don’t try to understand the precarious situation they are living in. Even if they work seven days a week, they would still remain financially incapable of buying new homes. They aren’t lazy. They are overworked, underpaid, and sad. The data is at the disposal of anyone who would like to disagree.