Interest rates have hit historic lows and home prices have fallen, making real estate a buyers’ market. But one important segment of potential buyers is not ready to sign on the dotted line: young adults.
The number of 25-to-34-year-olds owning homes in Massachusetts plunged 20 percent between 2005 and 2010, even as the overall number of homeowners in the state increased slightly, according to the US census. The rate of homeownership, which measures the percentage of housing units occupied by owners, fell more for 25-to-34-year-olds than any other age group, declining to 34 percent from 40 percent in 2005.
A mix of economic factors and changing attitudes makes young adults less willing and able to buy homes. Ultimately, analysts said, the strength of the housing recovery could depend on this age group, which accounts for a large share of first-time buyers who can spark home sales across the market.
High unemployment, crushing student debt, and tight credit conditions are keeping many young adults and families from becoming homeowners, analysts and real estate professionals said. At the same time, the turmoil that has followed since prices peaked in 2005 and the housing market collapsed is changing this younger generation’s view of housing, long thought of as a
Sarah Dussault, a 28-year-old self-employed social media consultant, rents an apartment in the Back Bay. Watching so many lose homes to foreclosure in recent years has made her reluctant to take on a mortgage and other financial obligations of ownership, she said.
And she feels no urgency to buy a home. Instead of setting aside money for a down payment, Dussault said, she is putting some into retirement savings and a lot into her business.
“The extra cash flow isn’t going toward owning a home,’’ she said. “My priority is my career, is what it comes down to.’’
Financially, the recent recession and high unemployment rate have put buying beyond the reach of many young people, said Chris Herbert, research director at Harvard University’s Joint Center for Housing Studies.
Rising student loan debt - up at least 35 percent since 2004 to an average of more than $25,000 per graduate, according to the Project for Student Debt - could also make it more difficult for young adults to afford a home, Herbert said.
“It impedes their ability to save for a down payment, and it almost makes it difficult for them to take on additional debt,’’ he said.
Adults under 35 made nearly one-third of home purchases in the Northeast in 2011, with about half of those sales to first-time buyers, according to the National Association of Realtors.
As first-time buyers, young adults play a critical role in spurring home sales, allowing existing owners to sell, move, and buy again. About a decade ago, first-timers accounted for 42 percent of all buyers, according to the realtors association. That fell to 37 percent in 2011.
Lisa Johnson Sevajian, a real estate agent with RE/MAX in Andover who works with many younger house hunters, said they have become far more cautious. Unlike the days of the housing boom, she said, they no longer approach properties with the idea that they can always sell at a profit in a couple of years.
As a result, they look at two to three times as many houses as they would have just a couple of years ago, Sevajian said.
“I am working with a far more educated young buyer right now,’’ she said, “who understands they may be in this house 10 years as opposed to three or four.’’
Jared Chase, 29, and his wife Rachel, 28, have been house hunting for more than a year, checking out at least 30 properties, he said. The couple, who rent a townhouse in Waltham, want a home with at least three bedrooms and a sizable yard to accommodate the family they hope to start in the near future.
“We’ve seen a couple that we’ve been really excited about, but we haven’t found it yet,’’ Jared said. “We don’t want to be moving in five years, 10 years.’’
Goodman, of UMass Dartmouth, and Herbert, of Harvard, both expect the decline in homeownership among young adults to continue for a while before stabilizing. What happens after that will depend on underlying economic conditions and government policy, they said.
Whether the government continues to promote homeownership through incentives, loan guarantees, and first-time buyer programs will have a significant impact, Herbert said.
“At some point we’re going to have to figure out what the government role is going to be going forward,’’ Herbert said. “That will have a big impact on what the cost and availability of mortgages is going to be.’’
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