Newsflash: Millennials are buying homes.
Newsflash: Millennials are rejecting homeownership in favor of the flexibility, the financial manageability, and the urban walkable lifestyle appeal of renting.
Newsflash: Millennials will never take to homeownership as generations before them did.
Newsflash: Millennials will behave just like every other generation; they're just starting the process later, er, for a number of economic, psychological, and behavioral reasons.
For a business that operates wholly within the realm between the possibility of risk and the potential of payoff, it's rough out there, especially insofar as all of the above statements are plausibly true, although none is certain in the way it will define the economy over the next 10 to 15 years.
When it comes down to it, history--especially when it somewhat faithfully records events around an accurate description of human behavior--is one of the better predictors.
And the fact is, history shows that people with a pretty good track-record of work and savings tend to be a pretty strong bet to pay off a home loan. They may be young; their credit scores may be a tad iffy; their ability to make a big down payment was limited.
And the fact is, many of those people are the heart and soul of communities and local economies that are thriving today. They were a good risk.
Here's some recently-available data from the Urban Institute's Housing Finance Polic y Center, in a report called "Comparing Credit Profiles of American Renters and Owners," by Wei Li and Laurie Goodman.
Here are a number of their fascinating conclusions:
- Sixty-four million or 52 percent of all renters have credit scores below 650, generally not high enough to qualify for a mortgage.
- At least 57 percent of individuals who experienced a foreclosure between 2003 and 2015 are not homeowners in 2015. Even so, a significant minority have reestablished homeownership.
- Many of the 15 million middle-aged renters with a past mortgage, particularly those in the four sand states (Arizona, California, Florida, and Nevada) and Colorado, appear to have been forced out of homeownership by financial troubles.
- Of the 96 million renters who have never had a mortgage, 42 percent have debt in collections.
- Twelve million or 5 percent of adult consumers are renters with a mortgage on another property. These consumers look almost identical to consumers who own their own property and have a current mortgage
Essentially, the big take-aways of the data are that people who rent tend to be younger and poorer. The assumptions one could make from the data are that many renters are not so by choice, but because the homeownership option may be a stretch for them, or beyond their reach.
In prior economic cycles, the United States found relatively reliable processes to tread the ground between the possibility of risk and the potential for payoff. Credit scores could settle into the high 600s without doing measurable harm to the likelihood the loans would pan out. This, in part, at least, fed an American Dream that was two-parts sweat and one part hope.
The only truth about Millennials is that there are enough of them to validate any number of statistical claims, and the story of their actual behavior and impact as a cohort making housing choices is only just beginning. Stay tuned.