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Laughter is the shortest distance between friendsThe homeownership rate is falling — from a high of 69 percent in the mid-2000s to less than 64 percent today — and lack of millennial demand is a major factor. Some even see a lower homeownership rate as “the new normal,” as an Urban Institute study declared.

This trend appears worrying, especially with homeownership still strongly linked to the American Dream. But to fully assess the effects it’s having on society, we must actually answer the question of why millennials aren’t buying.

My research has led me to an unconventional, yet surprisingly obvious, answer. Lack of finances is not the primary reason millennials are shunning homeownership — in fact, it’s not a significant problem at all. The real reason they’re delaying or avoiding homeownership is their lifestyle choices, especially in the realm of marriage and children.

This contradicts the conventional wisdom that millennials aren’t buying homes because they’re victims of the Great Recession and the burden of their college education debt.

Both arguments appear to make sense at first glance. It’s true that 20-somethings and even 30-somethings in recent years don’t have as many jobs and aren’t earning the same incomes they might have if they entered the workforce prior to the Great Recession.

It’s also true that the percentage of young Americans with four-year college degrees has grown from 24 percent to 34 percent over the past 30 years, and that today’s college graduates have student-loan debts that far surpass those racked up by their parents and grandparents.

Yet neither of these factors is decisive when it comes to millennials’ take on homeownership — and student loans are likely having little impact at all. In analyses I’ve done comparing Baby Boomers, Generation X and millennials, all at roughly the same age as millennials today, the picture becomes clearer.

While the average millennial did not make it through the Great Recession unscathed, the typical millennial has actually achieved similar levels of income and employment as Baby Boomers, but not as much as the members of Generation X.

Economic bad timing — yes. Yet interestingly, those same economic difficulties are why a higher percentage of millennials have pursued or are pursuing a four-year college degree. Yes, the accumulation of intellectual capital delays homeownership, but it should also lead to the income gains later in life that will make homeownership more accessible.

On the student loan front, my research and that of others indicates the debt-to-payment ratio has remained remarkably consistent over the years. Today’s college graduates may have more college debt, but they also enjoy longer repayment terms and lower interest rates than previous generations.

Moreover, their debt may even be helping them. Those who complete a four-year college degree are more likely to have the financial resources to purchase a home. In short, they will likely make more over the course of their careers, even if they have to repay loans along the way. College, if you finish, still pays.

This leaves two areas in which millennials are drastically different than their predecessors: marriage and children. For a variety of reasons, millennials are getting married later and having children later — if they do either at all.

This trend started with Generation X but has undoubtedly accelerated in the intervening years. The percentage of families with children has declined from roughly 50 percent to nearly 42 percent over the past generation. Over the same period, the percentage of married-couple households fell from 58 percent to 48 percent.

More than anything, millennials’ current aversion to marriage and children affects when — or if — they purchase homes. As long as they delay or forego these choices, they are much less likely to want to buy a home, even if they can afford it. Homeownership simply does not fit their current lifestyle.

This insight should guide pundits, policymakers and parents as they confront the conundrum of falling homeownership rates. At the very least, they should stop blaming student loans.

As for the economic concerns, no one would deny that a stronger economy, growing incomes and increased job creation would benefit every generation, millennials included. But they shouldn’t be surprised when that doesn’t lead to a homebuying spree by millennials.

That won’t happen until this newest generation’s lifestyle choices change. When they do, the good news is that most everyone, of any age, still believes that homeownership, when the lifestyle fits, is part of the American dream.

Mark Fleming is chief economist at First American Financial Corp.

For more information, visit http://firstamerican.com/.

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