Millennials entered the workforce in the middle of the Great Recession and now, as the oldest of this class of Americans turn 40, in 2021, they’re trying to put the pieces back together after the economic wreckage caused by the COVID-19 pandemic.
During the Great Recession, American workers saw 8.8 million jobs vanish into thin air, along with trillions of dollars in retirement, investment and real estate wealth.
Sarah Childress, Frontline Senior Editor, wrote this on pbs.org, “The Treasury Department, in an April assessment, put the total lost household wealth at $19.2 trillion. But that doesn’t take into account long-term effects of homeowners who may be less socially mobile — and therefore contribute less to the economy over time.”
The impact of the COVID-19 pandemic on millennials has been devastating.
Data Journalist for Statistica, Felix Richter reported this concerning the job losses caused by the pandemic, “The COVID-19 pandemic and the resulting lockdown caused 114 million people to lose their jobs over 2020. The ILO estimates working hours lost in 2020 were equivalent to 255 million full-time jobs, leading to $3.7 trillion in lost labor income. Although millions have returned to work, the ILO does not expect global working hours to return to pre-COVID levels in 2021.”
To add insult to injury, millennials were sold the importance of getting a “good education” hard.
So they went to college and came out with an average of $40,000+ in student loans, many with more than $100,000 in repayments, and stepped out into the Great Recession as their opportunity to land a good jobs and start repaying all that debt.
They are now largely underemployed, have little to no savings and have tens of thousands of dollars in student loans strapped to their backs. That means debt to income ratios are low while housing prices are rising much faster than wages are.
The scenario millennials face could not get much bleaker.
All these blows to the pocketbook have impacted the homeownership rates of millennials.
Calculations based on an analysis of the Census Bureau’s Current Population Survey show that 2020’s homeownership rate among older millennials ages 33 to 39 was 53.8% compared to about 60% of Gen X owned homes at the same age and 62% of baby boomers, according to an article on CNBC.com.
Millennials are renting more because of all the financial hardship this generation has faced. And that’s not all bad. Some experts point out how renting saves money that can be used to make better investments.
The number one benefit is forced savings since you’re paying down a mortgage.
The second benefit, of course, is appreciation. But if renters take the money they save from the costs of homeownership, such as taxes, repairs, and renovations, and invest that into a good mixed growth portfolio with low management fees, they can accumulate the same, if not more, wealth as homeowners in the same 10-year period of time.