The housing sector is set to record its strongest year since the bottom fell out of market, yet the strong recovery comes with an unusual caveat: The share of first-time home buyers has dropped to its lowest level in nearly three decades.

Market watchers agree there are multiple factors at play in the decline of new buyers, both economic and sociological. But few think that the drop represents any significant long-term shift in the attitudes or aspirations for the young people who make up the bulk of the first-time buyer pool.

So while millennials are putting off buying their first homes for lifestyle or financial reasons, they haven’t abandoned the American Dream of homeownership. Still, the 77 million millennials born between 1980 and 1995 face some thorny challenges before they can start measuring for carpets and curtains.

Young Shun House Buying

Americans are on track to buy roughly 5.77 million new and existing homes this year, according to the Census Bureau and the National Association of Realtors (NAR). That’s up about 4% from 2014 and will mark the housing market’s best year since the recession.

While the gains are good news for the industry and the overall economy, a closer look reveals a worrisome trend: Just 32% of home purchases in the past year were made by first-time buyers, according to NAR’s annual survey of home buyers and sellers. That’s down from 33% last year and well off the long-term average of 40%.

“There are a number of cyclical factors that make this less of a first-time homebuyers market than in the past. Those things will wear off, but they take time to wear off.” –Joseph Gyourko

In fact, the figure represents the second-lowest share of the market for first-time buyers since the NAR started its survey in 1981, and the lowest point since 1987 when only 30% of buyers purchased their first home. What’s more, only about one-third of first-time buyers were millennials, a smaller portion than might be expected, since young people traditionally make up the bulk of maiden purchasers.

Debt and Lifestyle

Potential homebuyers from the millennial generation carry massive student debt loads that are draining their spendable income and they also have a preference for urban living that offers less homeownership potential at higher prices. But observers agree that these obstacles are likely to be overcome as the group ages and begins to settle down.

The average amount of student debt per borrower for members of the Class of 2015, for example, was $35,000, according an analysis of government data by student loan expert Mark Kantrowitz. That figure has steadily risen in the last decade, from $20,000 in 2005. About 71% of bachelor’s degree recipients graduate with loans today, up from about 64% 10 years ago.

That’s a big burden for prospective homebuyers to carry. And it’s one reason more young people are living with their parents. In a newly released analysis, the Pew Research Center found that nearly half of males ages 18 to 34 live with family. Meanwhile, 36.4% of women in that age group live at home, the highest portion since the 1940s.

Millennials who graduated since the recession had a harder time getting a job. In 2011, the unemployment rate for 20 to 29 year olds with college degrees was 12.6% and 13.5% for those with only bachelor’s degrees. While that figure has declined in recent years, it had an impact on the groups’ long-term financial plans, notably home buying.

“They don’t call it the Great Recession for nothing,” says Joseph Gyourko, a Wharton real estate professor and director of the School’s Zell/Lurie Real Estate Center, who finds the low level of first-time buyers unsurprising. Wages have remained stagnant for low-skilled workers without college degrees, which may be putting home purchases out of reach for them as well. “First time homebuyers tend to be young, and it’s been tough for them to amass down payments.”

But wages are starting to rise and the employment situation is improving, Gyourko points out, which should help improve the down payments challenge. “There are a number of cyclical factors that make this less of a first-time homebuyers’ market than in the past. Those things will wear off, but they take time to wear off.”

“Young families have little money saved, more employment uncertainties, less access to credit and more debt from student loans. It does not make economic sense to buy a house under those conditions.” –Fernando Ferreira

Some of the home-buying sluggishness may also reflect millennials’ experiences living through the recession, notes Kelly Long, a member of the American Institute of Certified Public Accountants (AICPA) national financial literacy commission. “If they didn’t have a direct hit to their family, like a parent losing their job, they saw it happen to their friends.” That made millennials more cautious about their financial lives in general. “It affected everything at a very impressionable age.”

“The lingering effects [of the recession] are real, not just psychological,” agrees Fernando Ferreira, who is also a real estate professor at Wharton. After young people secure good-paying jobs, lenders often hesitate to advance credit to people with high amounts of student debt. “Young families have little money saved, more employment uncertainties, less access to credit and more debt from student loans. It does not make economic sense to buy a house under those conditions.”

Even those without poor credit histories may be dissuaded from considering home purchases, says Jessica Lautz, NAR’s managing director of survey research. She said while 25% of first-time home buyers had student debt, there is a significant population that doesn’t think they will get approval for a mortgage and doesn’t even try. “We’re not capturing the population who didn’t feel they could qualify.”

Fannie Mae CEO Tim Mayopoulos echoed that thought in a conference call following the lending giant’s third-quarter earnings recently. “I do think that there’s a sense out there in the marketplace among borrowers that credit may not be available, especially for people with lower credit scores. I think that what we’re probably going through is a period of adjustment on the part of borrowers.” He suggested more banks are moving to relax standards and make credit available, which could help boost the market a bit.

But some say it’s not only financial issues that are encouraging millennials to put off buying homes. Lifestyle shifts are also playing a role.

Millennials moving out on their own have been gravitating toward urban centers, where rents are higher. A 2014 Nielsen survey found that 62% of millennials prefer to live in mixed-use communities rather than suburbs. As a social movement, this has played a big part in revitalizing cities from Detroit to Brooklyn to Philadelphia. But competition for apartments in these areas also drives up rents.

Apartment vacancy rates already are at historic lows, while rents are rising. The national vacancy rate in the third quarter was 4.3% while effective rents rose 1.5%, notes Victor Calanog, chief economist at Reis Inc., a commercial real estate data company. On a year-over-year basis, rents were up 4.3%. The last time rents rose so quickly was 2007, adds Calanog, in a report on the three months ended September 30.

“There is definitely more demand for rental homes and apartments, so prices went up given the existing supply,” Ferreira explains. “Hopefully, rental prices will come down over the next few years, especially in cities without supply constraints.”

Marriage Can Wait

Another factor in delaying home purchases: Young people are delaying marriage. Under age 34, just 24% of women and 30% of men are married, about half the figure for that age group in 1940, according to the Pew Center. The median age of first marriage is now over 29 years for men and 27 for women.

“When these people become 35 or 40, I do believe they’re going to get married and have kids, and at that point they will buy houses.” –Joseph Gyourko

“People aren’t feeling that pressure to get there so quickly,” said Long of AICPA, suggesting that longer life expectancy also is a factor in millennials’ decision-making. “There’s more time to enjoy your twenties as a young adult, instead of rushing into parenthood and buying the first home and having those responsibilities. I think this applies across the board to all kinds of adultification of our lives. Everything is kind of being pushed back in life, because we’re living longer.”

While there’s no hard research supporting that suggestion, it is true that, in addition to delaying marriage, young people are also starting families later. Birth rates for women under age 30 are at record lows, according to the Centers for Disease Control and Prevention, while the rate of women over age 35 having their first child has steadily risen.

Thus, given that marriage and having children are life events that often drive the decision to buy a home, as millenials move up in years, experts say, they will eventually start checking out open houses.

“When these people become 35 or 40, I do believe they’re going to get married and have kids, and at that point they will buy houses,” says Gyourko. For all the appeal of urban living, they are likely to look for homes in the suburbs when they are ready to buy, because suburban schools tend to be better. “Until you have kids, you don’t need the suburbs, because you don’t need the schools.”