Covid: Another obstacle in the road to millennial home ownership

This past year, we have examined a broad range of factors getting in the way of the millennials owning their own homes. Our research has revealed that more than 50 per cent of 25–40-year-olds are still not homeowners – and many are not even close. In our multi-part report, Millennials and Home Ownership, a Distant Dream for Most, we have highlighted some of the key financial challenges faced by millennials and taken an in-depth look at the attitudes held by this increasingly frustrated and disillusioned demographic. We have analysed our response data as it relates to three distinct age ranges within the generation—Junior Millennials age 25 to 30, Mid-age Millennials age 30 to 35, and Mature Millennials age 35 to 40.?

As if millennials didn’t have enough on their plates when it comes to saving for their first homes, the pandemic has brought a whole host of new challenges for young savers. Carried out one year after the pandemic hit globally, the sentiments captured are likely to be compounded by the spread of variants, setting a new tone that may be with us for years to come.

About one-third of respondents said their home ownership plans had been set back by four years or more as a result of the pandemic. Worse still, one in ten said they had had to abandon their dream of owning their own homes completely. Nearly half of millennials (47 percent) surveyed had personally experienced negative effects related to Covid.

One surprising element of our research has revealed that Covid has shifted perceptions among millennials about where they might reasonably expect to live. Seven out of 10 (68 percent) of the millennials we surveyed agreed that Covid had some degree of impact, whether slight or strong, on their thinking about geographic possibilities, with affordability a key factor. At the time of our survey, a quarter of millennials were living with family or friends while trying to navigate the financial blows of Covid. As one millennial respondent put it:

“… I had no plans of moving, but lost my job at the beginning of the pandemic. I was unable to pay rent for all of 2020, resulting in a 'pay or quit' notice. Although I had some protection under Covid relief laws, I felt pressured to move. Simultaneously, I was able to get a well-paying full-time job. After looking at my options, I realized that if I moved in with my parents (who wouldn't charge me rent), I could pay off my debts and save up for a down payment. I plan to buy a house within the next year, moving closer to family.”

As affordable homes became more and more scarce, many decided to rethink their plans to buy a home entirely— especially those living in suburban areas (27 per cent). Those who had already saved a little for their down payment were less likely to be thrown off course, but most agreed that Covid delayed their plans in some way.

Covid has made city living even more unaffordable

While 68 percent across all groups indicated that Covid had influenced where they thought they might be able to live, one in five said it had had a direct impact. With many businesses pushing back their back-to-office dates and concerns around new variants, most recently Omicron, the mass exodus from city living is a trend that could potentially continue. 32 percent said they wanted to move to a smaller area, with the youngest groups (aged 25-30) the most likely to be pushed out of cities. One of our young respondents said:

“We live in a ruined economy and take jobs which we tolerate for the dignity of a pay check. Houses in my area (and the taxes therein) are astronomical. So, the choice seems to be a) stay near everything I love and be driven to the poorhouse or b) move away.”

Among those we spoke to, many had let go of their dream of living in a large city – but a quarter of respondents—many of them Junior Millennials hoping to get high-paying city jobs—still imagine they will be able to afford living in a city at some point in the future.?Among those looking to escape from the big cities they live in right now, expectant parents and millennials who were already saving for a down payment are leading the charge of migrating to smaller towns. In general, those who haven’t yet started saving for their first home are the most likely to want to live in bigger cities.

Is it Covid’s fault – or did the pandemic simply fan the flames?

Our research suggests the latter. The sentiment shared by many millennials is that the pandemic is just one more thing they have to deal with on their home ownership journey:

“Our generation has had many setbacks to home ownership between the stock market crash and the pandemic, student loan crisis, the cost of living going up much faster than the rate of salary increases… it has been extremely difficult to even be in a position to save money.”

Given that property ownership is one of, if not the most significant way most of us have to build wealth, this research has opened our eyes to the very real and potentially long-lasting challenges being faced by millennials. Add Covid to the pile of chronic student and medical debt and wage stagnation that has persisted for decades and it’s easy to see why millennials are struggling. Stay tuned as we explore some potential solutions…??