For years, several factors have been tossed around such as high home prices, fear over the last housing crisis, delays in family formation and even student loans as reasons why the younger generation is holding out.
But now, the Urban Institute released a study that shows the actual data behind these factors, revealing what is really holding Millennials back.
The generation’s homeownership rate was 37% in 2015, about 18 percentage points lower than the rate of Gen Xers and Baby Boomers when they were ages 25 to 34.
Here are five factors that Urban Institute found have kept Millennials out of the home-buying market longer than previous generations:
1. Delayed marriage: Yes, delaying family formation is, in fact, a hindrance to homeownership. As it turns out, being married increases the probability of owning a home by a full 18 percentage points, after accounting for other factors such as age, income, race/ethnicity and education. If the marriage rate in 2015 had been the same as it was in 1990, the Millennial homeownership rate would be about five percentage points higher.
2. Greater racial diversity: White households have the highest homeownership rate by-far, therefore the increasing diversity within the Millennial population also contributes to the lower homeownership rate. If the racial composition remained the same in 2015 as it was in 1990, the Millennial homeownership rate would be 2.6 percentage points higher.
3. Increased education debt: Student debt has been a growing problem, and could even be turning into a crisis. But how much does it affect homeownership rates? The Urban Institute’s data shows a 1% increase in student debt decreases the likelihood of owning a home by 0.15 percentage points.
4. Increased rents: Nationwide, rent just jumped to a new all-time high, surpassing an average $1,400 per month. And now, data shows that a 1% increase in a household’s rent-to-income ratio decreases the likelihood of homeownership by 0.07 percentage points.
5. Delayed child bearing: Not only are Millennials taking longer to get married, but they are also spending more time before having children. For those who are married, having a child increases the probability of owning a home by 6.2 percentage points.
Another important factor to Millennial homeownership includes parental wealth and homeownership status. For any generation, a child’s likelihood of being a homeowner increases by nine percentage points if their parent is a homeowner. Also, a 1% increase in parental wealth increases the child’s likelihood of being a homeowner by 0.016 percentage points.