Social media and the blogosphere are rife with controversy over military budget cuts and prospective cuts to basic housing allowance (BAH). It seems like there’s a lot to fret over, but for the average service member with a median age of approximately 28 years old, there’s at least something to be happy about, too. While our military families are compelled to move every two to three years, we are fortunate to receive a housing allowance. That BAH provides military families with the stability of knowing that they can live comfortably at each assignment without resorting to complex roommate situations or a need to rely on mom and dad. Their 28-year-old civilian counterparts, meanwhile, are not enjoying the same experience.
FINRA Investor Education Foundation recently concluded a study on the financial status and literacy levels of Millenials, those aged 20-34. They concluded that Millenials are struggling more financially than the past two previous generations did when entering the work force and adulthood. While they explained that Millenials clearly suffered financially from the double-whammy of student loan debt and a weak job market upon graduation, they also conclude that low levels of financial literacy have contributed to the poor economic outlook for this generation.
Why is this important? Good question. For military family homeowners seeking to sell their home in the next couple of years, it’s important to have an idea of what the home sale market will look like when it’s time to sell. Despite a positive outlook for the housing market last year, the most recent housing reports look dim, suggesting a rebounding housing crisis. The facts that the construction industry reports low confidence for quarter two of 2014 and that the Commerce Department reported that new home construction fell 6-percent in May alone doesn’t help matters either. Given that approximately 36-percent of Millenials currently live at home with mom and dad while many more not only rent, but also rent in shared homes with multiple roommates, means that the likelihood of finding a greater return on your housing investment by renting is more likely.
To better understand what the future of the housing market looks like, let’s take a look at some key facts about Millenials that come from the FINRA study:
- 65-percent earn less than $50,000 per year compared to 47-percent of all older adults
- 13-percent are unemployed
- 36-percent have students loans
- 31-percent have unpaid medical bills
- 23-percent spend more than they earn
- 32-percent have rainy day funds
- 12-percent don’t use banks at all
- 34-percent engage in at least three costly credit card behaviors, such as late payments
- 20-percent are currently in pursuit of a first college degree
- 25-percent have a college degree
- Family Life:
- 36-percent are married
- 45-percent have children
The latest census data shows that homeownership has steadily declined among younger adults since the early 2000s, and given the financial burden facing Millenials—supporting a family, medical bills, student loans, high rent, unemployment, and little ability to save for a down payment whether as a result of too many bills or poor financial literacy—homeownership may not be in the immediate future for this generation.
And yet, the American Dream is not dead. The Pew Research Foundation suggest that Millenials still see homeownership as a viable option as well as an important step on the path to adulthood; that step may just have to come a little out of order from how it occurred for previous generations. Economists, included the chief economist for the National Association of Home Builders David Crowe, explained to NPR recently that in previous generations, those who lived at home during their 20s and 30s simply represented pent up housing demand. Therefore, they conclude that the 36-percent of Millenials who’ve boomeranged back home will eventually unleash their financial fury on the housing market, triggering a massive influx of all of the savings they’re socking away while paying no rent to their parents into down payments, construction, and general housing supplies.
Given the troubling financial stats we looked at above, let’s prepare for the just in case that doesn’t happen situation. So, if you’re contemplating selling or renting, keep the stability of the military family market in mind; BAH arrives in the bank on a timely basis, and your military Millenial’s are far less likely to turn your 2-bedroom condo into a cozy four roommate crashpad. Want even more security in rent payments? Talk to your property manager
about requesting military rental allotments.