Builders are eyeing the next wave of potential home buyers -- the so-called millennials -- but whether this rising generation will embrace big mortgage debt remains an open question.

These 95 million people outnumber their baby-boomer parents by 10 million. The young adults among them, sobered by the recession, have relatively modest material expectations; many say they'd be happy with smaller living spaces.

The housing industry will have to convince the next generation that home loans are as necessary and prudent as the student debt so many of them already carry. Young Americans have already showed a strong aversion to credit card and other consumer debt after seeing their families' affluence "yanked out from under" their elders by the housing crisis and the Great Recession, as one expert put it during a recent housing conference in Anaheim.

Fast growth in student loans presents a particularly vexing issue, as often high monthly payments make it impossible for some young adults to save for a down payment or fit a mortgage into their monthly budget -- especially in expensive markets such as California.

Many millennials can't even afford to leave their parents' homes to rent their own apartments, much less buy a home of their own, said University of Southern California social-trend scholar Morley Winograd, co-author of "Millennial Momentum: How a New Generation Is Remaking America."

"We haven't done well by this generation in terms of opportunities," Winograd said earlier this month at the No Place Like Home conference, sponsored by builders' groups at Disney's Grand Californian Hotel. "We tell them they have to go to college to get ahead these days, but there's no GI Bill to pay for their education," as there was for veterans of World War II.

In an encouraging sign, the median debt of households headed by people younger than 35 fell 29 percent from 2007 to 2010, according to Pew Research. That contrasts with a mere 8 percent decline for households of those 35 and older. But the younger adults accomplished that admirable feat mainly by owning fewer homes and cars.

Questions over the finances of young adults have contributed to recent mood swings and mixed signals in the home-building industry, along with concerns over the costs of materials, land and labor.

The National Association of Home Builders/Wells Fargo survey said builder confidence rose 3 points in May to 44 -- but readings under 50 mean the consensus outlook is still poor. Housing starts topped 1 million in March for the first time in nearly five years before falling in April, but that's far below the historical monthly average of 1.5 million starts.

Meanwhile, student debt has risen eightfold, to an average of $26,000, with many young adults owing six figures by the time they begin looking for jobs, Winograd said.

One result is that millennials are "very much value buyers," Winograd said. Three-quarters of them say they need "essentials," not a luxury home, although they are also tech-oriented, interested in home theaters and fast Internet connections.

How are they going to afford homes?

"They're going to buy fixer-uppers. They're into do-it-yourself," Winograd said. "And many will only be able to afford a fixer-upper."

One factor apparently has remained constant since the millennials' grandparents returned home from World War II. A 2011 survey for the National Association of Realtors showed that -- despite headlines about the new urbanism -- fewer than 20 percent of adults prefer to live in cities, while twice that percentage still favor single-family homes in the suburbs.

Futurist author Joel Kotkin, a Chapman University social scholar, said millennials aiming to raise families echo that sentiment.

The recent and much-ballyhooed gentrification of downtown Los Angeles has increased its population from 35,000 to 50,000, largely as a result of young adults moving in, Kotkin said.

But the population of Eastvale, Calif., a city that incorporated in 2010, has mushroomed to 54,536, Kotkin noted, despite having been devoted mainly to dairy farming until the late 1990s. And the growth of such communities will continue as millennials leave city cores and their parents' homes to raise families in relatively affordable suburbs, he predicted.

The high housing costs in areas that might attract millennial families have housing prices that are "out of whack" with what many young adults can afford, Kotkin said.

"And that will drive more people to the interior -- so Eastvale will continue to do well," Kotkin said.

Indeed, California historian Kevin Starr questioned whether living in the "California coastal Riviera" -- from San Diego to Mendocino County -- would ever again be attainable to regular working folks.

"Will this California dream be only the prerogative of a national and international elite?" Starr asked. "Will there be future Lakewoods -- or only Carmels?"