Fewer millennials are buying homes — good for them

Millennial homeownership rates are way, way down. And believe it or not, that’s probably a good thing.

Across all age groups, the U.S. homeownership rate — at 62.9 percent — has now fallen to its lowest level in more than five decades.

Among younger Americans only, things look especially paltry.

Homeownership rates among Americans under age 35 are barely more than half the national number, at just 34.1 percent. This, too, is a record low and about a fifth below its peak from the gogo years of the mid-2000s.

Young people, it seems, are finding themselves falling further and further away from the American dream of homeownership. As you’ve surely heard by now, not only are they not buying their own houses, but they’re increasingly not even renting their own places. Instead, they’re returning to — or perhaps, never leaving — the nest.

Today about a third of Americans aged from 18 to 34 years old live with their parents. And for the first time since at least 1880, a greater share of this age group is bunking with Mom and Dad than in any other living arrangement (such as dwelling alone or with a romantic partner).

Things have gotten so dire that young adults now have replaced the elderly as the age group most likely to live in multigenerational households, according to the Pew Research Center.

Many colorful theories abound for millennials’ abandonment of homeownership. There are, for example, lots of thoughts about millennials’ purported love of the sharing economy and associated communitarian disavowal of all kinds of ownership — whether that be of houses, cars or even clothes.

But this explanation is wrong, at least, when it comes to housing.

Recent survey data show that young people very much still aspire to buy a home and expect to do so one day. Among people aged 25 to 34 who rent, 93 percent say they are likely to buy a home someday, according to Fannie Mae’s National Housing Survey. That compares with just 81 percent of renters overall. The Demand Institute has found similar results.

So why are young people delaying getting that deed?

One, they’re putting off getting married, which many still see as a prerequisite to homeownership. (Though a large chunk of millennials, I should note, instead view homeownership as a prerequisite to marriage.)

Two — and this is part of the reason they’re delaying marriage, too — is that they’re poor.

Relative to earlier generations, today’s cohort of young people is making less money, given their levels of education; more indebted with student loans; more likely to be underemployed; struggling harder to sock away savings; and facing shallower income-growth trajectories.

In short: millennials want to buy houses, but they simply can’t afford to.

And unlike during the mid2000s, there’s no credit bubble to paper over their pathetic earnings so they can buy that humble bungalow or huge McMansion.

The reasons behind this homeownership slide are certainly nothing to celebrate. But the slide itself might be.

We as a society tend to overvalue homeownership, at least from a financial perspective. Were it not for the psychic and sentimental benefits of homeownership, it’s otherwise hard to imagine financial advisers counseling their clients to dump all their savings into a single, giant, highly illiquid asset.

Especially one that, on average, shows such meager returns.

Over the past century, home prices have risen an average of about 0.6 percent per year, according to data from economist and Nobel laureate Robert J. Shiller. Investing in an index fund has, on average, far higher returns than owning, even after you take into account the costs of renting and the tax subsidies for buying.

For millennials, a mass lifestyle shift away from owning and toward either renting or crashing with relatives could be especially advantageous. That’s because buying a house not only locks up your savings; it also locks you, the owner, into a specific geographic location.

For workers who are just figuring out their careers — and who, given the unlucky timing of their graduations, are more likely to have started out in low-paying positions — this seems especially wrongheaded. We want young workers to be mobile and have as few frictions for job-hopping as possible. Changing jobs is, after all, the main way young people get raises and derail themselves from a poorly paying job track.