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Millennials want to own homes too, if US economy would consent

Agnel Philip, Bloomberg News on

Published in Home and Consumer News

WASHINGTON -- Kelsey Marshall and her boyfriend Chris Eidam, both 27 years old, call the home-buying process "terrifying." But they're clear about one thing: It beats the heck out of renting.

"We're wasting money where we are right now," near Bridgeport, Conn., Eidam said. "We just take our rent and we throw it away. That money doesn't go to anything."

If that line of thinking sounds familiar it's because, contrary to much of what's written about them, millennials have many of the same attitudes toward housing as their parents and grandparents. Most say they want to eventually own homes, and only rent because of financial necessity. They even appear to be choosing more traditional houses in the suburbs over renting or buying in city centers.

So far, so good, for the housing industry -- but that's not the whole story. Home-ownership rates are still near record lows, several percentage points down from before the housing bust, even after one of the longest economic expansions on record. Hardly anybody expects them to come all the way back. And that's not because of some new mindset among millennials -- it's because of the economy they came of age in.

For now, realtors are celebrating a small but noticeable uptick in buying among millennials, the country's largest age-group. Nationwide, for two straight quarters, the homeownership rate among those aged 35 and younger has increased.

That's "huge" for the industry, and shows that millennials are "getting back into the game," said Ralph McLaughlin, chief economist at Trulia. "In the long run, we expect millennials to own homes at rates of their parents or close to it," he said. "It's just that they're experiencing headwinds."

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But what if those headwinds are here to stay? Rents consume a larger share than they used to out of earnings that aren't growing much, making it hard to save for a down payment. Lending standards have relaxed some; still, young buyers already carrying record levels of student debt can struggle to qualify. Home building has lagged and become increasingly geared toward high-end houses, as wealth skews upward. Perhaps above all, for the generation that's just getting started on careers, job security is a thing of the past.

"You go back 20 or 30 years, people would get a job in their late 20s, early 30s with the idea that they might work there until retirement," said Dean Baker, co-director of the Center for Economic and Policy Research and an economist who studies housing. "People aren't in that boat today."

For young people whose careers will likely require frequent moves from city to city, the math often doesn't add up. Owners have to stay put for some years to recover the transaction costs, especially in regions where prices don't rise much. Tax proposals currently in Congress would reduce or eliminate deductions for mortgage interest and property taxes, further undermining the case for buying.

That's "not necessarily a bad thing," Baker said. "It's good for a lot of people to be a homeowner, but in a lot of cases, you might say someone wants the option -- they're in Chicago, New York and they get a good job offer in California or something -- you want people to be able to take that. If they are tied to their homes, that's a big commitment."

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