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In a study based on the 2010 median home price of $158,100, the Center for Responsible Lending, Durham, North Carolina, concluded it would take a little more than 20 years for a person with an average income of roughly $50,000 to save enough for a 10 percent down payment. ¶ A police officer making roughly $56,000 a year would have to save for two decades before purchasing a home. A registered nurse making $69,110 would need 15 years of savings, while a veterinarian earning $91,250 per year would need to save for 11 years. ¶ Those are eye-opening statistics-particularly for those in the upcoming millennial generation. There's been no shortage of articles that debate whether millennials will be the fuel that reignites the U.S. real estate and mortgage markets, It's clear this generation faces a number of challenges that previous generations did not. Those include fewer job opportunities and unprecedented student debt. When confronted with the prospect of saving for more than two decades to buy a house, it's no wonder millennials might be discouraged about their outlook for homeownership.
The rate of homeownership has fallen to its lowest levels in nearly 20 years (see sidebar, "Ken Rosen: Homeownership Should Be a National Priority"). And in November, the National Association of Realtors®, Chicago, reported that the share of first-time buyers fell to its lowest point in nearly three decades, despite an improving job market and low interest rates.
The drop in the number of first-time buyers is preventing a healthier housing market from reaching its full potential, NAR said when reporting the results of its annual survey, the 2014 National Association of Realtors" Profile of Home Buyers and Sellers.
The long-term average in NAR's survey, dating back to 1981, shows that four out of 10 purchases have been from first-time homebuyers. In the most recent 2014 survey, the share of first-time buyers dropped 5 percentage points from a year ago, to 33 percent, representing the lowest share since 1987, when first-time buyers represented 30 percent of the market. Yet I believe this age group could be a key factor in the recovery of the housing market.
The millennial generation-loosely defined as those born between 1980 and 2000-certainly holds a good deal of promise. Despite...