According to the 2017 U.S. Census, millennials make up a large portion of the housing market and are one of the biggest factors in the increase of homeownership rates last year. This holds true despite the lingering effects of the Great Recession and the fact that many millennials also face student loan debt.
According to research done by Citizen Bank in Providence, R.I., millennials are spending one-fifth of their income on student loans, and 60 percent of them will likely be paying off student loan debt until they have reached their 40s.
The 2017 Census also showed that millennials were frequently buying homes in Minneapolis, Pittsburgh, Birmingham, Ala., Buffalo, N.Y., and Virginia Beach, VA.
Detroit was one of the cities with the largest drop in millennial homeowners, however. Michigan is experiencing a shortage in the amount of homes for sale versus the number of buyers looking for a home to live in.
Starter homes in Michigan are not being built. Builders say this is because of regulation issues, a shortage of labor workers and the cost of land in areas that most desired.
The average home in Michigan is about 50 years old, and in order to keep up with the demand of homes, workers should be building about 25,000 homes a year.
Rose Patchman, a potential homeowner, has been struggling to find her first home in the southeastern Michigan area.
“I grew up in Detroit and I really want to continue to live somewhere in the area, where its familiar to me,” she said. “It’s just hard to find a home to own and not rent. Basically, if you find a house and can’t front the cash, you’re going to lose your dream home to someone who can pay for it in cash.”
According to Urban Institute, 97 percent of the homes that were sold in Detroit in 2014 were sold for cash, with the total number of mortgages that year totaling 490. The national average for homes selling for cash is 36 percent.
Most of the homes sold for cash in Detroit are sold to landlords and investors, and because Detroit is one of the poorest major cities in the nation, many lower-income citizens have a hard time getting loans from the bank.
“Detroit is really becoming a new place,” Roy Jones, a real estate agent, said. “There are still so many developing areas and some neighborhoods are not in a good enough place for banks to be interested, so cash is important to have when you’re looking for a home.”
According to estimates from real estate agents, a small number of millennial buyers are even looking to their parents to help them finance their first homes in Michigan. Parents seem to be more willing and able to contribute a down payment or co-sign a loan for their child’s first home.
“Young people aren’t getting married and starting families at the same ages as they used to, so a lot of young people are buying homes alone,” Jones said. “Parents step in and help and take some responsibility that normally a partner would take.”
Despite the shortage of homes in Michigan, the cost of housing is significantly lower than the national average.
The cost of housing in Michigan is a 67 on a national index scale of 100. Other costs of living, such as utilities and transportation, exceed the national average with an index of 102 and 101, respectively. Groceries, health and miscellaneous living expenses are all about average compared to the national index.
“A lot of houses that I’ve been finding in the city of Detroit seem to be extremely low, depending on the neighborhood, and the safety,” Patchman said. “Honestly, once you factor in everything else the costs add up. Prices still aren’t horrible but just don’t let them fool you.”
Despite the shortage of homes and the struggling housing market in Michigan, Jones is keeping positive on the status of the housing market.
“Hopefully houses get built and we can continue to grow and develop Michigan,” he said. “At the end of the day we are a community and providing quality housing is the biggest factor in helping our community grow.”