Buying a first home is an achievement and an opportunity that most look forward to at some point in their lives. The Millennial generation has had a more difficult time accomplishing this goal. Research by The Urban Institute shows that home ownership among Millennials is down 8% compared to the previous two generations. This translates into almost 6 million more renters compared to the generation before them. Why is this generation purchasing fewer homes? Reasons include economic factors and generational preferences.
Economic Difficulties
Since 2010 the U.S inflation rate has been reported to be near the expected average levels of about 2%. This is, however, an incomplete picture of the price increases that are being felt in the U.S. Several expenses are taking up a greater portion of income relative to previous generations and it’s leading to a delay in the ability to save for a home.
The amount of student loan debt that many are burdened with continues to grow. The average student loan payment is up to $393. Two-thirds of graduates from public universities finish college with an average of debt of over $25,000.

The cost of automobiles has also increased well above the inflation rate. The average payment for a new car is over $500, and over $350 for a used car. New car loans are also being stretched out over a longer period to help deal with the increase in cost.
With 0% or near 0% interest rates for the last 10 years, homes have seen a steep rise in price. These low rates increased the demand for mortgages and gave existing homeowners access to cheap capital to invest in upgrades and remodeling in their homes. Denver, along with the coastal cities, has become some of the most expensive places to live in the U.S. Home prices in these areas have experienced near double-digit appreciation multiple years in a row since 2010.

Stagnant wage growth has kept the Millennial generation, along with middle-class America, in a difficult position in being able to keep pace with increasing costs. After an adjustment for inflation, today’s average hourly wage has roughly the same purchasing power as the hourly wage in 1978.
Generational Factors
The desire for Millennials to live in major urban areas has led to a decrease in home ownership. Many people in the generation prefer to rent in the more expensive parts of a city rather than purchase in the suburbs. Those who prefer to stay in the city as they age may never be able to afford a home and will continue to rent.
Millennials are staying single longer and in higher frequency. Single income earners have a harder time and spend a longer amount of time to save up for a down payment. In addition to the single Millennials, more are remaining in their parents home for a longer period. There is a 10% increase in the 18-34 age group who live with their parents compared to the previous generation.

Millennials are also having fewer children. With no need for the additional space young married couples have less reason to move towards the suburbs and instead continue to live in the city for longer periods of time and remain renters.
Investor Benefits
Investors who own properties in high-demand cities should continue to see solid returns on their real estate investments. With fewer people buying, investors could potentially expect less competition from first time home buyers for lower and mid-priced single-family homes. Homes in desirable neighborhoods should see little-to-no vacancy as long the generation keeps its preference for living near major urban areas.
Homes in nearby suburbs could end up being in high demand in the next 3-6 years. As married Millennial couples do decide to have children they will eventually move out of the city for additional space. For those who have not been planning, they may be forced to continue renting in nearby suburbs. For cities like Denver, there are many communities less than 20 miles away from the city center that still present strong investment opportunities.
If new construction does eventually catch up in the coming years, many first-time home buyers who have been saving for a purchase could end up opting for new homes rather than homes in or near the city. This could potentially increase the available inventory of homes in the city which would present great rental opportunities for investors and dwellings for people who want to live in the city but do not have a down payment saved up.
Sources:
https://www.bls.gov/cpi/data.htm
https://blog.usajrealty.com/posts/a-look-at-the-denver-real-estate-market
https://www.curbed.com/2018/7/11/17541364/why-arent-millennials-buying-houses
https://theruethteam.com/userfiles/1370/files/DMAR_MarketTrendsReport_Feb2019_FAIR.PDF