A whole generation of young Americans seem to have
adopted a set of priorities quite different from those of their elders. Millennials or Generation Y, those Americans
born between the early 1980's and the early 2000s are putting education, at
least temporarily, ahead of major life events such as marriage and
homeownership. Sam Khater, CoreLogic's
Deputy Chief Economist, says that the Great Recession figures into this
equation as well.
In an article written for CoreLogic's Insights blog, Khater notes that the
generation's emphasis on education is having a big impact on homeownership
rates which, for Millennials stands at 37.9 percent. This is nearly 14 percentage points below the
rate for Baby Boomers (born between 1946 and 1964) at about the same life
He points out that marriage often drives the desire
to own a home and each successive generation is marrying later. Twenty-six
percent of Millennials between the ages of 18 to 32 were married when surveyed
in 2013, down from 36 percent of Generation X (born in the years between
Boomers and Millennials) and 48 percent of Boomers at the same age.
While Millennials have put marriage on hold they
have increasingly focused on higher education and 34 percent of the cohort within
that generation aged 25 to 32 had a bachelor's degree in 2013 compared to 24
percent of Baby Boomers at a comparable age.
As higher education is supposed to be an investment in future earning power
Khater says that a more educated generation should have an improved ability to
become homeowners in the long term. 'However,
in the short term, they will carry higher debt loads, and those with less than
a bachelor's degree are facing stiffer economic headwinds.'
A recent Pew Research Center study looked at household incomes by generation,
analyzing the real median incomes of 25- to 32-year-old households in each of
the three generations four years after each went through a recession. The Millennial generation's median income was
$57,200 in 2013, compared to $54,100 for Generation X, and $54,800 for Baby Boomers. But when those incomes were segmented by both
generation and educational attainment Millennials with a bachelor's degree had
a median of $89,100, 3 percent higher than Generation X ($86,300) and 16
percent higher than Baby Boomers ($76,800). Millennials appear to be doing well relative
to the previous generations.
But that does not hold true for those with less education. Millennials with some college attendance had incomes
6 percent lower than Generation X and 12 percent lower than the Baby Boomers. With only a high school degree Millennials
earned 12 percent less than Generation X and 19 percent less than Baby Boomers.
While income inequality has increased for the country as a whole, there is more
income inequality among Millennials than prior generations.
These three factors, delaying marriage, focusing on education, and lower
income levels for those who have not gone to college has slowed the rate of Millennials'
household formation. In 2012, 36 percent of Millennials were living with their
parents, the highest share in at least four decades.
Khater says the delayed household formation and time spent on education are
putting Millennials' labor and balance sheet profiles on lower trajectories
than earlier generations. Federal
Reserve research indicates that they are less likely to be in the work force
and have half the net worth of Gen X and Boomers at the same age. This is due to student loan debt as well as
lower incomes for those who didn't go to college. Thirty-seven percent of households under age 40 had student debt in 2013, the highest
number on record. Student debt is also
associated with higher levels of non-student debt because students tend to
finance living expenses while in school as well.
The Great Recession severely impacted Millennials but Khater says they were
on a fundamentally different trajectory than their predecessors even before, particularly
in terms of education, debt, and income. "The cascading impact of Millennials'
changing economic impact is hampering their ability to achieve homeownership,
which puts an increased emphasis on entry level affordable homeownership, such
as condominiums. Unlike their predecessors, only a minority of Millennials are
homeowners, so perhaps a more apt nickname for this cohort is Generation
Renter, or Generation R," Khater says.