The link between homeownership and educational attainment is easy enough to understand. Higher education means higher income, which means more money for a down payment and a mortgage and all the rest. The Millennial generation is the most educated generation in U.S. history. Yet it is not the most anchored.
A bachelor’s degree is not a requirement for homeownership, but it is starting to look like one. As household incomes are increasingly linked to educational attainment, so is homeownership status. At the same time, higher education can be a temporary barrier to homeownership. This paradox might be the driving factor of the U.S. housing market today, which is still slow to grow even despite a strong recovery.
First American, a U.S. title-insurance provider, tracks homeownership rates and related demographic and economic factors in its Homeownership Progress Index. Mark Fleming, the chief economist for First American, says that the change in education status is looking more and more pronounced in the housing market. “The [homeownership] gap is widening by education attainment level,” he says.
Take two different demographic groups: people without any education and those with higher education. In 1990, the difference in homeownership rates between people without a high-school diploma and people with a bachelor’s degree or higher was 15 percent. “Having an education helped,” Fleming says. But now things are different: The gap between those two groups in 2015 was 28 percent.
A 2014 report from the Pew Research Center helps to explain this gap. The median monthly earnings for a young adult with a bachelor’s degree grew 13 percent between 1984 and 2009. Households with a master’s degree also saw their incomes rise. But those without a college degree—meaning people with an associate’s degree, a high-school diploma, or no diploma—saw their median monthly earnings decline between 1984 and 2009.
Despite Millennials’ educational ambitions, they aren’t buying homes and starting households. Rather it’s because of their educational ambitions that they aren’t yet able to think about making the commitment. “If you’re busy getting educated, that takes time,” Fleming says. “You’re much less likely to be a homeowner when you’re in college.”
Meanwhile, households that have not pursued an education and who might be prepared for homeownership may not have the means. Education is one of the perils of being part of the digital generation: Getting a degree means putting off homeownership for a long time—while not getting one may mean putting it off for good.