The State of the Nation's Housing 2014 was released last week and Millennials were the headline —the Harvard Research Center finds they are key to a stronger housing recovery. While the housing market is recovering, it's doing so at a much slower rate than first thought, following the slow recovery path of the overall economy.

Why are Millennials so important?

During the live webcast about the report, Chris Herbert, Research Director, Harvard Joint Center for Housing Studies, reminded us that young buyers have always been important—they add to housing demand and allow others to move up. However, they are also coming of age during the worst recession since the Depression, Herbert said. Key challenges for millennials are: rising interest rates, tight credit, student loan debt and stagnant incomes.

The homeownership rate realized a steady decline for the past nine years, but if you look at the age breakouts for the homeownership rate, the story is actually much worse. From 2004 to 2013, the slide in homeownership rates has been most dramatic among younger adults compared to other age groups. Rates for 25-34 year olds were down nearly 8 percentage points and for 35-44 year olds, some 9 percentage points. Herbert said factors contributing to homeownership drop among young buyers include:

• More wariness among buyers, eyes wide open since the crisis
• Less confidence in increased home prices
• Credit conditions are much tighter, making it harder to get in the market
• Median incomes down for those in their 20s and 30s

From 2002 to 2012, the real median income for households aged 25-34 fell 11 percent, leaving their real incomes below those of same-aged households in 1972. Herbert asked, when incomes go up, the bigger question will be can they get a mortgage product that works?

Mike Calhoun, President, Center for Responsible Lending, highlighted that people are still very interested in owning and it's good for the stability of communities and families. While foreclosure rates were horrific, for most families homeownership was still valuable. Homeownership also remains a primary way for people to steadily build wealth over their lifetime, Calhoun said.

Calhoun believes we have a much safer market for consumers today. The 30-year fixed rate has come back and provides stability. Even in the housing crisis, lower income buyers did very well if they got a 30-year mortgage. Subprime lending was the problem, not a specific income bracket.

State Housing Finance Agencies (HFAs) are often overlooked, but they are one of the success stories that needs to be told Calhoun said. State HFAs have continued to provide credit through all market conditions. Moreover, those buyers held onto their homes during the crisis. He noted that HFAs will continue to be very important for borrowers who need down payment assistance.

Follow the conversation on Twitter at #harvardhousingreport.

To view the original article, visit the Down Payment Resource blog.