Homebuyer affordability is at an all-time high level, and the the monthly mortgage payment-to-rent ratio for the U.S. is near the lowest it has been in more than 35 years.[1] So why are we not seeing a pickup of first-time homebuying activity? Based on past social patterns, the Echo Boomer generation (born between 1981- 2000 ) was scheduled to start their homeownership cycle more than a couple of years ago, but so far, they are choosing to rent or continue to live with their parents. Some may be quick to think that is a side effect of the housing crisis; however, I think that we also need to add up the impact the internet is having in our lifestyles and our increasing awareness for the environment to get a better picture of what may be happening here.

In a recent study, the Harvard Joint Center for Housing analyzed home prices, median income and rental data for the top 100 metro areas across the country, and it estimated that 85 areas are affordable to adults 25 - 34 years (Echo Boomers).[2] The median home is considered affordable in this analysis if mortgage payments, with a 5 percent downpayment (more typical for first-time buyers), property taxes and insurance, and non-housing debt payments make up no more than 43 percent of a households income. The author suggests that although many metro areas offer affordable levels of homeownership, home buying among this generation remains low because there is a mismatch between home prices and income levels for this group. Real renter income for households aged 25-34 remains at some of its lowest levels in more than a decade. The unemployment rate for this age group peaked above 10 percent in 2010 and stayed above 7 percent throughout 2013. This study confirms that the re are economic forces that have an impact on lower rates of first time homeownership, but as I said earlier, I think that we must account for other factors as we try to understand these societal changes.

Executive vice president for the Multifamily Business of Freddie Mac, David Brickman wrote an article in which he discuses Echo Boomers have different priorities than previous generations had at this stage of their life: Echo Boomers (born 1981-2000) want to have certain experiences, but don't necessarily want to own the related products.[3] He tells us that this generation is environmentally conscious, and innovative tools that derive from internet based technology enables them to minimize their impact on the environment and have a more transient lifestyle, share cars, share rides, cloud computing, etc . This has led to a desire for greener living and has fueled a movement to urban areas. Echo Boomers like to walk or bike to work, hate traffic, like diversity and culture.

David is not alone, in the Summer of 2010 the National Association of Realtors published the Generation Y The Future Generation of Home Buyers[4] article that also discusses this generation has a different set of priorities when they choose where and how to live. The article argues a large percentage of these 91 million of individuals (Baby Boomers were estimated to be 79.4 million) is looking for the kind of places to live that are consistent with smart growth. Technology allows them to do this.

So the lowering rates of first time home buyers is not simply a result from the housing crisis. Better access to information is dramatically changing our preferences and decision making. Young adults are choosing culture rich and environmentally friendly lifestyles. However, rents will continue to rise because a large percentage of Baby Boomers is also choosing to rent smaller places in urban areas. I think that sooner or later, rising rents will drive the younger ones to take advantage of low monthly mortgage payments.

1) http://freddiemac.mwnewsroom.com/press-releases/freddie-mac-august-2014-u-s-economic-and-housing--otcqb-fmcc-1137533

2) http://housingperspectives.blogspot.com/2014/07/interactive-map-where-can-renters.html

3) http://www.freddiemac.com/news/blog/david_brickman/20131021_apartment_life.html

4) http://www.realtor.org/sites/default/files/publications/2010/on-common-ground/on-common-ground-06-2010-gen-y.pdf

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