Will millennials ever own a home? (© Image Source/Getty Images)

© Image Source/Getty Images

The recent recession kicked the millennial generation — those in their 20s and early 30s — in the teeth. Some wonder if they'll ever be able to own a home. Experts worry, too, especially because the housing market depends on young, first-time buyers.

The downturn began just as many young adults were entering the workforce. Americans ages 20 to 24 suffered a 12.9% unemployment rate in May. That was actually an improvement from 14.6% last year. (Bing: What's the rationale behind naming generations?)

A college education is supposed to give job seekers an advantage. But to get it, many took on loans that now prevent them from qualifying for a mortgage.

"Sobering" is how the Consumer Financial Protection Bureau describes the roughly $1 trillion that Americans owe on school loans, 67% of it owed by people under 40. Just over half of college graduates from 2006 through 2011 have full-time jobs, yet six in 10 have student loans with an average balance of $20,000.

First-time-homebuying years
In another time, Amanda Bate would have been a typical first-time homebuyer. She has always wanted to own a home. Now that she's 26, with interest rates and home prices at or near record lows, the time seems right. She went shopping this spring near her workplace in Birmingham, Mich.

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"The housing market was so low. I thought, 'I could possibly get a house,'" she says.

The house she loved was listed at $80,000. The mortgage payments would have been about $500 a month, cheaper than the $610 a month she'd paid when she rented an apartment.

But the mortgage broker dumped cold water on her dreams. Even working a full-time job, plus a part-time job on weekends, and even though her parents have been helping pay her student loans, buying a home was out of the question.

For one thing, she'd need an $11,000 down payment. "I don't even have a savings account," she says.

But it's her student loans — $1,470 a month in payments on $123,000 in combined balances — that have made buying impossible. Bate earns just $30,000 as marketing director for a small media company.

She says she wishes someone had warned her. She now can't imagine when she can ever buy a home of her own. Meanwhile, she's living with her family, like one in five 25- to 34-year-olds, and "everything I have goes into those loans."

A generation struggling
Some experts see the double curse of unemployment and student debt as an ominous sign, not only for millennials but also for the whole economy.

"Debt, coupled with double-digit unemployment, has hobbled millions of young adults who would have bought homes, married, had children and feathered their nests with all the middle-class goodies that keep our economy humming," demographer Cheryl Russell writes.

Tighter mortgage-lending requirements add to the trouble for young would-be homebuyers. The numbers paint a picture of a generation falling behind:

  • 36.8% of people under 35 own homes, down from 43% in 2006.
  • 61.4% of people ages 35 to 44 are homeowners, down from nearly 69% in 2006.
  • Just 9% of people ages 29 to 34 got mortgages in 2009 to 2011, compared with 17% a decade earlier, even before home prices inflated and mortgages became easy to get.
  • 40% of those with student loans have put off making big purchases such as homes and cars.

But Paul Ashworth, an economist with economic-research firm Capital Economics, says he isn't convinced that student debt will prevent millennials from eventually owning homes. Despite recent widespread concern over student borrowing, sketchy data make it hard to know if the proportion of borrowing is worse than in the past, he says.

Home affordability calculator

At roughly $1 trillion, student debt  is greater than outstanding auto loans ($730 billion) or credit-card balances ($693 billion). But it's unclear if that's a change, Ashworth says. "My big thing is, is it any different than it used to be?" he says.

Also, on the upside, six-digit student-loan balances like Bate's are unusual. Just 3.1% of borrowers owe more than $100,000. Most borrowers, 72%, owe less than $25,000. That's still sizable, especially if your salary is $25,000 or $30,000, and 14.4% of borrowers have missed at least one payment, so many clearly find their loans hard to repay. But it's equivalent to buying a new car — a big purchase, but one many young people manage.

There's no question, though, that many young adults are struggling.

"These were people who were most likely to be buying a home with very little equity at the very top of the boom," Ashworth says. "They would also have been the people who got whacked the hardest when the market turned down because they wouldn't have had the time to build up equity." That makes them more prone to foreclosure and negative equity.