The Direct Impact Parents Can Have On Home Ownership For Their Children
We've just survived one of the worst economic crises in modern history but what does that mean for you and your children? The media paints a picture of prosperity and Jay-Z is rapping about credit and buying $2 million dollar properties in Dumbo. However, is the housing market dishing such massive success to everyone? I've always wanted to have an optimistic outlook on life but personal experiences have taught me otherwise. This is why in the midst of record home prices and scorching hot real estate markets across the country, it was no shock when I came across the bleak data regarding millennials facing enormous obstacles that are barring them from accomplishing the American Dream. Due to these circumstances, it is imperative that parents begin playing a larger role in their children's lives to ensure they are able to participate in the long term wealth building plan called home ownership. The first major obstacle millennials (like myself) are facing is a huge burden of debt and it's primarily student loan debt. Government investment in education has consistently declined over the last two decades while tuition has been rising, forcing students to make up the difference. This has led to a boom in student debt amounts. This debt, which is accruing interest months after school is completed, is such a financial drain on young adults that it prevents them from being able to afford not only a home of their own, but many major purchases. In a sense, many young people have their lives on pause. They don't get married, they don't have children, they don't start businesses, etc. In NYC, it's a regular occurrence to see old college friends still living in their childhood bedroom in their parents' home. Another obstacle is rising home prices. The S&P CoreLogic Case-Shiller National Home Price Index shows prices and home values are shooting up. The declining affordability seems to be affected more due to price than interest rates. In addition to rising home prices, rents are rising along with them. This forces renters to dedicate a larger portion of their income to rent, which prevents them from saving for home costs like down payments, closing costs, repairs, etc.
The bleak job market doesn't help this at all. So you have a ton of student debt and that is weighing you down. Then you try to save but rental prices and home prices keep increasing so that is weighing you down. Now the only job you can find, even with your college/graduate degree, is part time, contractor or a full time job without any benefits that doesn't pay a living wage. The key term here is "living wage". Massachusetts Institute of Technology has great data on the amount of money one would need to make in order to have a living wage. (http://livingwage.mit.edu) The unemployment rate in many of the largest cities in the country is actually higher than what's being reported. This is because of how the rate is calculated. The Bureau of Labor Statistics only counts those who have looked for a job in the past four weeks as unemployed. That leaves millions of people out of the formula. The increase in people qualifying for social programs like food stamps and medicaid clearly shows the atrocious market for living wage jobs. Baby boomers are known as the generation that got everything. Free or cheap college/graduate school education, cheap home prices with a vast sea of government funding in the housing market, plentiful jobs with pensions and a large share of the profits in regards to their labor. My generation received none of that. In fact, we received the exact opposite. Many parents are pushing young adults out the house once they finish college, but this is a huge mistake. Even with great credit and consistent work history, these young adults don't have the money to take part in home ownership, i.e the American Dream and this can have dire consequences that effect them for the rest of their lives. Add in the stricter lending guidelines and you have a disaster. Hence why parents need to help their children combat all these obstacles. Without parents supporting their children until they're stable and helping them pay those student loans, down payments and repair costs, millennials will be the lost generation. One thing about debt, it's intergenerational just like wealth. So if parents want their children to accomplish the American Dream, they have to buck up and pay up because not only does their children and grandchildren chances for success depend on it, so does their entire lineage.