Mama may have, Papa may have … but God bless the child that’s got his own. The famous Billie Holiday lyrics ring true when it comes to the current state of homeownership.
While millennials made up 36 percent of homebuyers in 2017, they have yet to catch up with other generations as far as home ownership is concerned. A recent study found they have lower homeownership rates than the nation’s two previous generations, and millennials of color have rates nearly 15 percentage points lower than their white counterparts.
“Student loan debt has hindered many, especially within this millennial population,” said Maurice Hampton, treasurer of the Chicago Association of Realtors and managing broker at Centered RCG in Chicago. “The other aspect is that, due to the stripping of the wealth, the wealth rebuilding among blacks and Latinos is extremely lagging behind other communities since the recovery of the recession.”
The study from Urban Institute, a Washington, D.C., think tank, and Better Mortgage, a New York-based digital mortgage company, found that between 2005 and 2015, the homeownership rate among white young adults was 38.5 percent, compared to 28.8 percent for Hispanics and 14.5 percent for African-Americans. In that time frame, the black millennial homeownership rate fell almost 10 percentage points and was the only group to not experience an increase during the housing boom.
“We had the credit crisis, and millions of Americans lost their homes and we still don’t have basic financial literacy for Americans. … We don’t have it for the most vulnerable members of our society,” said Vishal Garg, CEO of Better Mortgage. “If your parents didn’t come from wealth or aren’t in the business of managing their own money, you fundamentally are left on your own. You don’t learn how to compound interest or figure out how to shop for the best loans, and fundamentally every aspect of American life today — to move up in the socioeconomic ladder — requires engaging in some sort of borrowing,” he said.
Denise Soler Cox, a Denver resident, was incensed by the report’s findings. Cox, 47, one of the filmmakers behind “Being Enye” and a co-creator of Project Enye, a website aimed at empowering Latinas, agrees that part of the problem is lack of generational wealth for many first-generation Latinos. She says there are also cultural norms at play, such as reconciling collective vs. self-reliant mindsets.
“Family is everything in our culture … if it’s between me saving for a down payment on a house, or the family needing money, many are probably going to choose to help their family,” Cox said.
“I don’t remember many times sitting down and talking to my mother about money. All I was ever told was don’t get into debt, that it’s terrible. But she never talked to me about good debt, that there is such a thing as good debt. There’s a number of contributors to this, but at the end of the day brown people are the most affected,” she said.
Cox aims to shift some cultural norms in the Latino community, in hopes that more people of color can start forging their own financial legacy.
The report confirms some of Cox’s and Garg’s beliefs. It attributes low millennial homeownership rates in part to student debt, tightened credit standards and limited availability of affordable housing in cities, but points out that minorities face an additional burden — a lack of intergenerational wealth (wealth passing from one generation to the next).
Young adults are more likely to be homeowners if their parents are homeowners and have the means to help their kids with a down payment, according to the study, which found that white parents have an 83.7 percent rate of homeownership, compared to 64.4 percent for Latinos and 47.7 percent for African-Americans. And buying a house can be difficult when, according to a 2018 investigation by Reveal from The Center for Investigative Reporting, nearly two-thirds of mortgage lenders deny home loans for people of color at higher rates than for white people.
But millennials’ shifting attitudes toward homeownership have also contributed to the decline, according to the study. Those who endured the Great Recession at a certain age are unlikely to take wealth building via homeownership as a given — millennials choose to become buyers when it meets their needs but aren’t sold on the idea that making sacrifices today to save for a down payment is the best strategy.
“I think we have people who are very debt-averse because they watched their parents go through a foreclosure or struggle with mortgage payments or lose their homes — I think that’s a contributor,” said Erica Dumas, spokesperson for Better.
To turn millennial homeownership numbers around, the study suggests enhancing financial education at the high school and college levels and improving homeowner awareness through online educational campaigns. It says streamlining the mortgage process and changing zoning regulations to allow for more construction in areas with limited housing supply would also help.
“We have to have these hard conversations, and we have to see how we can influence the younger generation into understanding that it’s kind of on us, no one is coming to save us. We have to save ourselves,” Cox said.
Garg is hoping the study, will be a rallying cry for those seeking change in the homeownership landscape, both publicly and privately.
“You have to decide to pick a place on the battlefield and keep saying I’m going to push and make this process more accessible and affordable,” he said. “We will continue to work with public officials and institutions to discuss policy recommendations, and call on private institutions to join us in educating the public and confronting issues, like financial discrimination, head on.”
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