A major part of the housing market recovery is still missing: the first-time home buyer.

For various reasons, the millennial generation is shunning homeownership. In fact, according to the National Association of Realtors, homeownership rates among those 35 and younger is 36%--the lowest level since 1982.

It’s been a tough recovery for millennials. Many of them entered the labor market at the height or in the immediate years following the 2007 financial crisis and are still working part time or underemployed. Job creation has picked up in the last several months, but wages have remained stagnate, which makes it difficult to save and compete in a market of rising home prices. What’s more, many members of this generation have nearly $30,000 of student loan debt in a time of tight lending standards.

Coldwell Banker agent Phil Jones in Long Beach, Calif., says his state’s housing prices have rebounded so strongly that they’re cost prohibitive for many younger buyers.

He adds that young adults are cynical about the wisdom of buying a home after seeing the value of their parents’ homes plummet during the recession. “They are skeptical even when historically, real estate, particularly in California, has been a good investment.” He adds that “since 1973, the median price has risen 2100%, but [millennials] have to believe in homeownership.”

This generation is also much more mobile than their parents and grandparents. They wouldn’t think twice about switching jobs multiple times in their career or moving for employment. This mobility makes renting the best financial option.

“Renting is becoming more desirable for a lot of people,” says Brian Simon, COO at New Penn Financial. “The rental market is very hot. There isn’t a lot of supply and high demand.”

While there are valid financial reasons keeping millennials on the sidelines, some are sitting out for the wrong reasons. Joel Gurman, vice president of mortgage lending at Quicken Loans, says some first-time buyers mistakenly think home prices rose too quickly and are now over inflated and unaffordable.

Bidding wars are still common in some markets, and investors offering all-cash can be hard to compete with, which is why Gurman says buyers need to do their research.

“Certain pockets are near historic lows.” What’s more, he says even if prices are appreciating, they aren’t as high as they were in 2006.

Another prevailing myth is that homebuyers need to put 20% down to secure a loan. Putting down that much will avoid paying private mortgage insurance, but there are loans available that require much lower down payments.

“One of the main reasons renters do not become owners is because of the assumed burden of saving for a large 20% down payment, a requirement that does not exist,” says Gurman. “Fannie Mae and Freddie Mac insured loans require a 5% down payment and FHA insured loans only require a 3.5% down payment. That means on a $200,000 home purchase, the buyer only needs to put $7,000 down, as opposed to $40,000 if putting 20% down.”

Tougher lending standards in the wake of the Dodd-Frank Act have resulted in a longer and more regulated lending process.

“They aren’t sure they understand these regulations; it has caused problems,” says Jones. He points to a recent survey by the California Association of Realtors that shows if given the choice, 27% of homebuyers say they would rather have root canal than go through the loan process again.

At the end of the day, the choice to rent or buy is very personal. “Owning a home is not about a piece of real estate or investment,” says Simon. “It’s your own personal choice and feeling about having control over the roof over your head.”

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