Gen Y home ownership: A dream deferred?

With the housing bubble popped, many under water mortgages and house prices declining in many areas, you might think that the silver lining of the housing debacle is an increase in the number of young people able to buy their first home. Many may be struggling to get started, but once they have a few years of work under their belt, lowered home prices and interest rates should be more within reach of financially savvy members of Gen Y.

Not so fast, says a recent article in the New York Times, which profiles a thrifty and sensible young New York couple struggling to get on the property ladder in a city that continues to have sky high real estate prices. Metropolitan areas - where many of the jobs are - are still out of reach for those in less lucrative professions, reports the paper:

Things begin to look a lot less affordable when you consider hot spots like Los Angeles. The median home there costs about 5.86 times the median income, compared with 4.89 in San Francisco. New York isn't far behind: the median home runs about 4.62 times the median income, in part because of foreign buyers who take advantage of a weaker dollar. In Boston, it costs 3.7 times median income.

For many would-be buyers, that means it is simply more affordable to rent. But that can be frustrating for people who thought they had done everything right, except for choosing a higher-paying profession.

Home ownership rates are indeed down across the generations, but when it comes to Gen Y, are their well publicized financial struggles and the continuing difficulty of buying a home really the whole story? Young people's bank accounts may be diminished but it doesn't appear their dreams are. Earlier this year, a survey from Trulia found 70 percent of Americans (and 65 percent of those 18-34) still think owning a home is central to the American dream.

With that many young people firmly hanging on to the notion that home ownership as a fundamental goal, it's likely that the will of Gen Y will find a way. One possible adjustment may be an increased interest in smaller homes among Gen Y. Trulia found just six percent of those surveyed dream of a monster home bigger than 3,200 square feet, and the National Association of Home Builders tells us that young people are turning their backs on suburban McMansions.

The future may be smaller, more thoughtfully designed spaces, or, with more young people moving home after school, perhaps the solution will be an increase in multi-generational households and a longer, more collaborative on-ramp to adulthood.

How do you think Gen Y will manage to achieve their dreams of home ownership?