FEMALE NARRATOR: When you hear that phrase the American dream, what picture comes to mind?

For a long time, the classic version included a white picket fence, 2.5 children, and of course, a house.

MALE NARRATOR: The importance of home ownership is still embedded in American culture.

7 in 10 adults say they want to own their own home someday, and yet actual homeownership has dropped to its lowest level since 1967.

The biggest culprit, those pesky millennials with an 18% decrease since 2004.

FEMALE NARRATOR: If owning a house is still important, then are young people just being foolish, or are they reacting rationally to a changing economy?

MALE NARRATOR: In theory, owning a home still makes a lot of sense, because it kills two financial birds with one stone.

It's a place to live and a long term investment.

Every time you make a mortgage payment or the value of your home increases, you're saving money for your future self.

It's like a piggy bank you can sleep in.

But the world is changing in ways that make this scenario harder to pull off.

FEMALE NARRATOR: Younger people have more debt than previous generations, mainly thanks to student loans.

The average amount that a graduate owes has tripled in the last 25 years, which means that many young people already have a house sized debt cloud hanging over them without even having an asset to sell.

MALE NARRATOR: As if that wasn't bad enough, millennials have a larger burden for retirement.

In the olden days, the average American could expect three sources of income to support them in their autumn years-- a pension, social security, and personal retirement savings.

But thanks to shifting labor trends and shrinking unions, pensions are quickly becoming a thing of the past and it's giving this three legged stool a major wobble.

And since we can't expect social security payments to substantially increase anytime soon, younger people will be expected to make up the difference with larger retirement savings, which means less cash on hand to put towards a house.

FEMALE NARRATOR: The shifting labor market has also led to more pressure to be geographically flexible, instead of being tied down to one location.

And the importance of travel for young people is at an all time high.

In the US, millennials rank travel as more important than homeownership, and report they're more likely to set aside money for that rather than buying a home.

MALE NARRATOR: Considering these factors, it's no wonder millennials are viewing homeownership as more of an option than a necessity.

So is it an option that's right for you?

Here are some questions to ask yourself.

FEMALE NARRATOR: One, can I get good mortgage terms?

Unless you've got hundreds of thousands of dollars sitting around and cash, you're going to have to borrow the money and pay it for the privilege.

How much you'll pay in interest is determined by a number of factors.

But generally speaking, in order to qualify for terms that make home buying a good investment, you'll need a consistent provable source of income, a credit score of 760 or higher, and a down payment at or close to 20% of the home price.

If you can't meet these requirements, it might not be the right time to buy a home.

MALE NARRATOR: Two, will I have emergency money leftover?

The money you have wrapped up in your house isn't liquid, meaning you wouldn't be able to get to it easily if you need it.

So if your AC breaks down, or your car needs repairs and you don't have any emergency funds set aside, the only thing you'll have to cling to is debt, which is more of a lead weight than a life vest.

So be sure you have at least three times your monthly expenses leftover after your down payment.

FEMALE NARRATOR: Three, can I stick around for at least five years?

Buying a house that you have to sell again quickly probably won't end well.

You have to consider upfront costs, like realtors and inspections.

Plus at the beginning of your mortgage, most of your monthly payment is going towards interest, meaning your debt isn't actually shrinking that much.

For many buyers, it can be a decade or more before that ratio is even 50/50.

MALE NARRATOR: So how do these factors shake out in a real world example?

FEMALE NARRATOR: Let's-- MALE NARRATOR: Run the numbers.

This is Ramon.

Ramon has a good steady job.

He's been saving money and he's thinking about buying a house for around $200,000.

He only has enough for a 15% down payment and no emergency fund.

FEMALE NARRATOR: Also, there's a chance Ramon might decide to relocate to New York with his girlfriend when she graduates from law school in three years.

By that time, Ramon will have only paid off around $9,000 of the loan principal.

So if the home value increases by an average of 5%, he'll be able to sell it for a bit more than he bought it for.

But that's not counting realtor fees, property taxes, and up keep.

MALE NARRATOR: If everything goes perfectly smoothly, Ramon will just break even.

But if just one thing goes wrong, like losing a job for six months, or he has to replace his home's roof or AC, it's a different picture.

Ramon might want to hold off on buying a house for now.

FEMALE NARRATOR: If you're like Ramon, don't freak out, you could never buy a home but still be OK financially.

There are even some perks, like not being responsible for maintenance costs and being able to easily pack up and move if you get a better job opportunity.

MALE NARRATOR: But investing is like exercise-- some workouts deliver better results than others, but anything is better than doing nothing.

So if you're not going to buy a house, it's extra important that you're making investments in other areas, like a 401(K) or a company that you own.

FEMALE NARRATOR: There's no sugarcoating it, when it comes to home buying, Millennials got a tough deal.

But you can overcome that disadvantage by understanding your situation and starting to plan for it now.

MALE NARRATOR: And that's our two cents.