Unemployment impacting younger homeowners
While unemployment rates are slowly dropping, young adults between the ages of 25 and 34 are still struggling as far as employment goes. With people of that age still struggling for jobs, the housing market is suffering. Those are the ages of many first time home buyers, and if they are unemployed or underemployed they cannot purchase a home. Many experts believe first-time homebuyers are needed to help the recovery reach its optimal levels.
According to Friday’s report from the Bureau of Labor and Employment Statistics, approximately 74.8 percent of young adults are working. That number is the lowest in a year and is very far below normal levels. Even during the recession anywhere from 73 to 74 percent of young adults were employed.
The unemployment rate for younger adults within that age range increased in August, climbing to 7.8 percent and attaining its highest level since February. Another hard hit for the market is that many of these young adults have an abundance of student loan debt, which also ties up their funds. Student loans not are the largest portion of non-mortgage or home equity related debt. Student loan debt totals $994 million, according to a second quarter report from Kroll Bond Ratings.
The report said, “The ongoing increase in student loans is disconcerting in light of the elevated unemployment levels for younger age groups.”
Experts indicate that the lack of job security is the number one reason many young adults are not buying their own home. Student debt load is also preventing young adults from being able to save enough to come up with the down payment for a home. It prolongs the saving process and makes the time to come up with the down payment more drawn out. For those who are able to come up with a down payment and can qualify for a mortgage, they usually must opt for a smaller mortgage, and unfortunately, a smaller home than they need or plan on purchasing.
Although many homeowners are nearing retirement age, many of them were forced to spend their savings during the recession. The result is more people who are 55 and older are staying in the workforce, so fewer jobs are opening for the younger adults. Without the good jobs available, it may be a much longer wait for younger adults before they can purchase homes. Until they can make a home purchase, they are either renting in the multifamily sector or single-family homes. Some are living with relatives.