Millennials’ college debt burden and their delaying of marriage and parenthood are likely forcing them to push back home-buying plans, a new report says.

The Federal Reserve Bank of St. Louis addressed the problem in a report issued at the end of last week. According to the Fed, which looked at American Community Survey data from the U.S. Census, the generations that came after the baby boomers have been delaying home purchases, in part because of their college debt and in part because they’re also delaying marriage and parenthood.

“Millennials deciding to get married later in life could potentially delay homeownership,” said the Fed report, titled “Understanding the Generational Gaps in Homeownership." “By having two incomes, married individuals can better save for large payments, such as a down payment for a home. Millennials are also deciding to have children later in life compared with their previous generational cohorts, which may reduce their need to buy a home since these two life events are often connected.”

According to the census data examined by the Fed, only 40% of millennials were married at age 30, whereas 60% of Gen Xers were married by that age and 80% of baby boomers were. Meanwhile only 35% of millennials age 30 and over had kids in the house while 45% of the baby boomers and Gen Xers said they had kids in the house at that age.

The Fed said that, anecdotally, college debt is also playing a role since college costs have skyrocketed.

One of the Fed’s tables “shows that nearly half of millennials with at least some college education have student loan debt in their 30s, compared with only 13% of boomers at the time they were in their 30s. We also see that millennials have the highest median debt-to-income ratio of 0.27, compared with only 0.04 for boomers. Gen X is not far behind millennials on both metrics.”

Advisors contacted by Financial Advisor said many of the reasons their young clients wait to buy a house has to do with the huge initial down payment.

“The price of a home in Southern California is holding back my younger clients from owning a home,” said Delia Fernandez of Fernandez Financial Advisory in Los Alamitos, Calif. “If they want to live within a reasonable commute to work, a ‘starter’ home is $800,000 around here. And most who want to start a family don't want to buy a condo, which may start at $525,000 for a two bedroom/two bath.”

She asked how a young couple can at the same time save for a 10% to 20% down payment and pay off student loans and handle childcare, “which can cost $1,375 per month” or more. “My young professional couples tell me this all the time.”

Andrew Herzog, an advisor in Plano, Texas, agreed and said it's down payments, not interest rates, that are influencing young people’s decisions.

“From my experience, it's mostly the purchase price of homes, not the interest rate, that shocks younger clients,” he said. “They hear stories about what their parents paid for a home, and they compare to today. They also look back to the time before Covid hit and anchor their price points to 2019 or so. Many worry they would simply be paying too much, especially for those attempting a 20% down payment, and keep holding off hoping for a change. The problem is, what if prices don't significantly drop, and a home is never purchased at all? No one knows the future, but that's the hesitation I see from younger people.”

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