Photo: Robert Clark

Compared to previous generations at the same age, far fewer US Millennials are homeowners.

But while today’s Millennials are over-burdened with debt stemming primarily from student loans, enhanced financial education and a streamlined mortgage process could go a long way in increasing the Millennial share of homeowners, according to a recently published study by the DC-based think tank Urban Institute.

In 2015, the Millennial homeownership rate was 37 percent — 8 percentage points lower than that of the Gen X and Baby Boomer generations at the same age (25 to 34).

Delaying marriage and starting a family, as well as rising rents are among the chief barriers keeping Millennials from homeownership.

“Being married increases the probability of owning a home by 18 percentage points, after accounting for other factors such as age, income, race/ethnicity and education,” writes Urban Institute in the study.

Urban Institute claims that if the marriage rate in 2015 had been the same as it was in 1990, then the millennial homeownership rate would be “about 5 percentage points higher.”

And for those Millennials that are coupled, having a child increased the probability of owning a home by 6.2 percentage points — after accounting for other factors like age, income, race or ethnicity and education.

Meantime, most real estate experts cite student loan debt as the principal challenge facing Millennials economically. Urban Institute determined that a 1 percent increase in student loan debt decreased the likelihood of owning a home by 0.15 percentage points.

Less educated Millennials are quickly falling behind in homeownership, a trend that could have serious repercussions down the road if left unchecked.

“For millennials, the gap in homeownership rates between the more educated and less-educated population has grown significantly compared to previous generations,” says Urban Institute.

If unaltered, current trends could likely result in even greater wealth disparities among white, black and hispanic Millennials which in turn will have a negative impact on the rate of minority Millennials buying a home.

But Urban Institute says that the future can be rosier for Millennial homeownership prospects with just a few small alterations to current policies and practices.

Providing enhanced financial knowledge about the process and benefits of homeownership — specifically financial and downpayment assistance programs – Millennials may be more likely to alter their spending (and saving) habits at an earlier age. This would help alleviate some of the challenges of saving for a downpayment.

Also, by expanding mortgage lenders’ credit assessment criteria to include factors like rent and utility payment history when evaluating credit history, lenders could be more likely to look favorably on first-time Millennial buyers.

Finally, easing regulations on land restrictions could possibly enable builders to build more homes, especially in areas where supply is extremely limited. Increased housing supply would ease the upward pressure on home prices and bring many Millennials back in the marketplace.

Click here to read the entire report.

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