For Millennials, the obstacles on the road to homeownership are much bigger than a speed bump.
Also known as Generation Y, Gen Next and the Internet Generation, Millennials are digital natives who cut their teeth on reality TV and YouTube. They redefined terms such as “share”, “post” and “like.” And they most likely don’t recall life before cell phones.
Millennials account for 80 million people in the U.S. alone and include those born from 1980 to 2000. In terms of sheer numbers, they’re the most influential group today, reshaping our culture and impacting the economy—as well as the housing market.
Millennial Home Ownership – Buying in or opting out?
Overall, Millennials have reached both the average marrying and first-time motherhood ages—both catalysts for homeownership. And while styles and trends might change with generations, buying a place to call “home” has long been part of the American Dream. For Millennials, the obstacles to achieving this dream are more pronounced than ever.
A recent Millennials and Homeownership report from HomeUnion® found that “Collectively, high prices, rising interest rates, and a heavy student loan burden has priced most Millennials out of the most desired neighborhoods. This imbalance will force Millennials seeking a single-family home to either rent or move into more distant suburbs.”
In addition, a shortage of available homes has driven up prices — particularly among starter homes that tend to fall within first-time buyers’ budgets. According to a recent report from Zillow, There were 3% fewer homes on the market in February compared to a year ago, and home values are up nearly 7%.
Added to the mix is the fact that today’s ultra-competitive market means that new homebuyers are often up against multiple bids… which can lead to costly bidding wars. Mostly first-time buyers, Millennials, are competing against repeat buyers who have more buying power and experience.
And all of these challenges are underscored by a tighter lending environment and stiff credit requirements.
Millennials, Making Tradeoffs is Key
The bottom line is that Millennials will probably need to compromise on what they’re looking for in a home in order to enter the housing market. They will need to find a suitable balance between important criteria such as affordability, commute times and school ratings.
In reality, a good balance can be difficult to strike, which ultimately drives many would-be Millennial homeowners back into the ranks of renters. As Kathy Orton of the Washington Post notes, “Overall, Millennials are falling behind other generations in homeownership, with first-time home buyers, who usually consist of 40 percent of the market, stuck at 34 percent.”
HomeUnion®’s Millennials and Homeownership report reinforces this statement: “The idea that Millennials will be the next wave of buyers is largely overblown. Long commutes accompany the strong performing schools where 25- to 34-year olds can afford to purchase a home.”
For more information about Millennials’ homebuying challenges, visit HomeUnion®’s report “Millennials Forced to Make Tough Homebuying Decisions”
In addition to this report, HomeUnion® puts a wealth of information is at your fingertips to help you make smart property investment decisions. Our focus is on streamlining the investing process, from start to finish, so that you can focus on life’s other important priorities. To learn more, schedule a consultation with one of our Solution Managers.