Millennials are less likely to be homeowners than previous generations, and according to a report from the Urban Institute’s Laurie Goodman, VP, Housing Finance Policy, and Research Associate Jung Hyun Choi. These numbers drop even more between white and black millennials. The Urban Institute found that between 1999 and 2015, white young adults aged 18 to 34 had the highest homeownership rate of any racial or ethnic group at 42 percent, while only 18 percent of black young adults were homeowners.
Urban Institute stated that this 12 percent gap may be due to differences in parental homeownership and wealth. According to the report, children of homeowner parents are 7 or 8 percentage points more likely to own a home themselves, due to the fact that these parents can better communicate the importance of homeownership and can be there to guide their children through the homebuying process. Additionally, the wealthier a parent is, the more likely their children will become homeowners. Urban Institute found that a 10 percent increase in parental wealth increases a young adult’s likelihood of owning a home by 0.15 to 0.20 percentage points.
This may explain the racial divide due to the disparity in homeownership and wealth between white and black households nationally. According to Urban Institute, the homeownership rate for black parents is 35 percentage points below their white counterparts (49 versus 84 percent) and their median wealth is 15 times smaller ($14,400 versus $215,000).
Homeownership stability is a major factor as well. Parents who were stable homeowners were more likely to have adult children who are homeowners. Statistically, young adults whose parents stayed homeowners for the entire sample period, between 1999 and 2015, were more likely to be homeowners. Furthermore, those whose parents switched between homeownership and renting frequently were not statistically more likely to be homeowners than those with parents that never owned and only rented.
This impacts young black adults disproportionately as black parents are less likely to own. Thirty-one percent of black parents remained homeowners between 1999 to 2015, compared to 72 percent of white parents.
For more information, find the full report from the Urban Institute here.