Insight: Generation Z's foreseeable housing dilemma

While young people move back in with their parents amid the pandemic, their chances of ever buying a home of their own continue to decrease

The prospects of asset accumulation for Millennials have become progressively dire, and as Generation Z ages into adulthood, I fear that we may face similar, if not more bleak, circumstances when seeking to acquire assets.

With a ballooning student debt crisis plaguing college graduates who are entering an increasingly oversaturated labor market coupled with the onslaught of a pandemic-induced recession, our hopes for accruing wealth in any respects seem naive at best, and impossible at worst.

Nearly 70% of 2019 graduates were saddled with some form of student debt, according to Student Loan Hero, affixing to the roughly 45 million borrowers of student loans.

Due to a substantial scholarship and parental support, I have thankfully not had to go into debt for my undergraduate degree, but with the value of higher education arguably dwindling as the price of attending a university continues to rise, I'm left wondering how fruitful my debt-free degree will be in the self-commodification economy.

As someone with aspirations of being a writer in my adulthood, I feel as if delving into a career path with a low median salary while entrenched in the wage stagnation and burgeoning economic inequality of the 21st-century may bar me from acquiring assets, similar to the preceding generation, and ultimately hinder any future familial desires of mine.

This aforementioned student loan crisis poses a serious dilemma in growing our net worth as we exit our four-year universities with spiking debt we've collectively accumulated further straining our asset to liabilities ratio.

The generational wealth gap between Millennials, Generation X and Boomers is widening as well, according to a 2019 study by liberal think tank New America. 

On top of these pressures on young Americans, a recent analysis of monthly Census Bureau data by Pew Research Center outlined that 52% of adults, aged 18-to-29, resided with one or both of their parents in July of this year, a 5% increase from 2019. 

This share of young adults living with their parents is similar to those seen during the Great Depression era, the analysis said, with 23% citing closures of college campuses and 18% identifying job loss or other financial reasons as their reason for changing housing.

Despite this purported exodus from college campuses, ASU welcomed over 13,000 students into its residence halls this semester, a decision I view as borderline foolish of students given both the limitations the University has implemented and the absence of a cooking space, omitting the standard microwave and mini-fridge.

With these compounded imposing factors impacting our antecedent generation in harsh ways that are weighing on their familial decisions, it's distressing to envision how these worsening barriers and the untold future of the pandemic will impact the current generation as we all age into post-higher education adulthood.

Young people's diminishing opportunities for acquiring assets

In August, the Federal Housing Finance Agency extended its moratorium on foreclosures and evictions for homeowners with FHA-insured single family mortgages covered under the CARES Act until the end of this year, giving families an additional four months to "recover financially from the adverse impacts of the pandemic."

Along with reducing the number of foreclosures through the end of the year, the moratorium may make it less advantageous for lenders to supply loans to prospective homeowners, said Seth Pruitt, an associate professor of finance at the W.P. Carey School of Business.

"That being said, the structure of what FHFA is doing is they're going to buy these conforming loans that the banks make," he said. "So insofar as the banks can originate loans or mortgage brokers originate these loans, but then get them off their balance sheet to the federal-backed agencies, then that would kind of argue in the other direction that it would not change the lending activity."

If mortgage rates continue to remain low, mortgage origination will likely remain "relatively brisk," Pruitt said, and while the moratorium may reduce incentive for lenders to supply loans to borrowers, he doesn't see any concrete adverse effects currently.

Home prices are seeing a slower rate of increase, Pruitt said, with expensive cities like New York and San Francisco seeing a slight dip in average pricing, while cities like Phoenix continue to see healthy rising house prices.

Asset accumulation, like compound interest, is something that benefits the proprietor increasingly the longer one possesses an asset, Pruitt said, so with the recession brought on by the pandemic, it may worsen the delay today's young Americans have in buying a home and gaining from it financially.

"I don't know if the effects will be even longer," he said. "It would make sense to me that that'd push back the time … for when you're going to be able to buy a home, and that will eventually affect the asset accumulation you're able to achieve because you'll have that home for a shorter amount of time."

For me, this amalgam of a low-paying career, a debt-ridden labor force, widening economic inequality and now, a second once-in-a-lifetime economic disaster for Millennials, is weighing on the current and previous generations with remarkably bleak force.

I fear that the continued deterioration of any hope for economic stability and asset ownership may only become more commonplace as America doubles down on its vision of the neoliberal economy, defined by its ruthless automation and parasitic student lending practices. 

"And for millions of Americans, their home is their single biggest asset," Pruitt said. "So not being able to get that asset early on and accrue the expected, not for sure, but expected home price appreciation that would give you a return... on your asset, (will) push things back."

The pandemic will undoubtedly bring about a new normal, but whether the normal of the future will be defined by an attempted waning of economic inequality or an ongoing decay of opportunities to own assets is yet to be seen.

For the sake of myself and other young adults, I hope it is the former, and that we will have better odds for owning assets and building our collective net worth than our Millennial counterparts.


Reach the reporter at stellefs@asu.edu and follow @samtellefson on Twitter. 

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