Millennials can’t Buy Property Soon Enough

Abstract

        When we started this project we designed a survey to answer our original research question which was to determine whether or not there was a relation between how many people live in a home versus the cost of the mortgage payment or rent. From this we were attempting to prove that higher costs of living required more than one income thus leading to more people living in the house. However we did not have enough question that could narrow down how many people were actually making money in the house as opposed to a dependent.

        Upon running multiple data tests we did find there was a relation between age group and homeownership. The questions that helped us determine this relationship were; what is your age and do you own or rent. It has been a topic of many studies that people have a much harder time today buying a house then people did 30 years earlier so I decided to take that piece of data and further research what the major causes of the decline in home ownership is.

Introduction

        Within the last 30 years home prices have increased drastically while income has increased at a much slower rate. This has been attributed to much of the fault as to why home ownership rates are down and while it is a factor, there are also many more factors that have attributed to lower rates. So what does actually contribute to the decline in home ownership? Are we just making excuses or is there more to it? I have found that there is much more to it and I will discuss how marriage, kids, ethnicity, education and student loans impact the home ownership rates today.

Literature Review

In the article; Here's why millions of millennials are not homeowners. (Nova 2018) the author goes over several reasons why millennials are having a hard time buying a home. The number one reason for the drop in home ownership rate is the fact that millennials are getting married later than previous generations. This factor alone has an 18% negative impact on home ownership rates. This leads to having children later which contributes another 6% negative impact on home ownership rates. One of the main reasons for this is education. Instead of getting married and having children early, people are opting to get their degrees and professional lives together first. Student loan debt of 100K or more can lower the home ownership rate by 15%. So if you are a Hispanic female going through school using student loans and your not married or have any children then you have less than a 10% chance of owning a home during that time frame. Although education does lower home ownership rates for these reasons you are well worth waiting because the rates of home ownership for someone with a college degree are 71.4% compared to someone with a high school education has a 60.4% chance of being a home owner.

Another factor of lower home ownership rates that the article expresses is that Millennials are more ethnically diverse. Statistics from American Housing Survey state that in 2015 home ownership rates by race are as follows. White: 70.8%, Black: 42.2%, Asian, Pacific Islander: 56.6%, Hispanic: 45.4%, Other: 49.0%. What the statement implies is that a predominantly white community becomes a mixed community causing home ownership rates to go down.

There are two more factors the article talks about, one is the high prices of both homes and rent costs. The article states that most Millennials are rent burdened so its nearly impossible to save to buy a home. The last factor was actually a positive factor which shows that people that grow up with parents that are home owners increases their chance of buying a home by 10%. Growing up in that environment sets a standard in your mind that home ownership is the ultimate symbol of success so it becomes a higher priority in your mind.

Methods of Research

Initially what we did is constructed an 18 question survey to try and verify if there is a relation between housing cost and housing density. Once we determined our questions we sent a link through social media to try and reach out to as many people as possible. We choose this method because we wanted to get answers from a wide range area. The area of response was concentrated within the Los Angeles, Riverside, and Anaheim area.

        After we gathered 40 surveys we converted the data to an excel sheet and eventually into IBMs SPSS system where we ran multiple T-test that were inconclusive and ran a chi square test. We were unfortunately not able to find a correlation between hosing costs and home density but we did however find a correlation between age and home ownership while running another chi square test.  Through that chi square test we found there was a 0.011 asymptotic significance between age and home ownership which means there is a significant relationship between the two data sets. It also showed that out of the 40 surveys only 8 were home owners in which 7 of those were in the 29-68 category while only 1 was in the 18-28 category. The other 32 respondents were either renting or living with family. From this piece of data we changed our research question to; Does age have an impact on home ownership rates?

Discussion and Conclusion

As I began the research, I found there are multiple reasons for the decline in home ownership rates. Some of those reasons include, Income vs housing costs, the reduction of non-white families, overall decrease in married couples with kids, and most importantly the mortgage crash of 2008. I also found factors that increase home ownership rates such as an aging population and an increase in education, however the factors that increase home ownership rates are outweighed by the factors that decrease home ownership rates so there is currently a net loss from 1985.

The research done in the literature review shows multiple reason why there is a decline in home ownership but is it necessarily a bad thing? If you were optimistic you might say that this is not a problem at all, it is in fact encouraging to know that people are striving to become more educated. Studies show that people with a college degree have a 71.4% chance of being a home owner so even though home ownership rates of younger ages are effected initially, more people will eventually own homes in the future.

The lack of home ownership is a sign of a weakening economy but as more educated people enter the market the better we will be able to solve the issue and close the gap in affordability. We have many different case studies and articles built around the struggle of home ownership today and education is the key to understanding, studies should be reevaluated and questioned as to whether the implication are positive or negative in the immediate context or the future or both?

If I were to believe it was an issue I would research low income housing studies to find out what solutions are proposed because ultimately the reason younger people are not buying property is because they simply don't have the money for it.

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