Whether millennials are just getting out of college or moving their way up as a young professional in the working world, the question of housing remains a big concern for many in this generation. While their parents may have had dreams of a nice house and white picket fence, millennials are now embracing renting as a more cost-effective option and better fit for their lifestyles.
One the biggest obstacles for millennial homebuyers is having a good credit score, according to Steve Deggendorf, a finance executive at Fannie Mae, CNBC reported. This argument is supported by a survey by the Federal Reserve Bank of New York that found 41.4 percent of consumers said they believed their credit was not good enough in order to purchase a home. A lower credit score could mean higher interest rates on a home, which could cost homebuyers over time.
Millennials continue to struggle with debt, lack of savings
The leading reasons why younger renters want to rent instead of buy homes largely have to do with lack of finances. The New York Fed survey found the majority of renters (55.7 percent) said they choose to rent because they have an overwhelming amount of debt or do not have sufficient funds to buy a home. Another issue potential homebuyers have is earning the income necessary to afford mortgage payments, which would encompass interest on the loan, home insurance costs, property tax and other expenses.
As millennials look into paying student loans, credit card balances and more, they are viewing renting as a more affordable alternative to owning a home. Real estate investors are also seeing more rental housing demand from younger generations, according to a market report from Realty Trac. Daren Blomquist, vice president at the real estate data provider, said millennials will often experience significant changes in their life that could result in them having to move from place to place.
He said real estate investors will have to take this into account when selecting properties to buy or sell. Realty Trac believes investors will see an average annual return of almost 10 percent for all counties researched in the nation in its study, saying that investors will see greater home price appreciation and returns concerning rental income.
“Investors leveraging demographic trends will often be able to amplify rental returns and home price appreciation, particularly when it comes to trends in the baby boomer and millennial generations, which combined account for approximately 147 million people – more than 60 percent of the U.S. adult population,” Blomquist said.
Jonathan Eppers, CEO of renting mobile app RadPad and a millennial himself, said millennial renters often want the flexibility to move, whether to move closer to jobs or desirable locations.
“A lot of younger renters when they get out of college, they don’t want to settle anywhere, they want to find a job somewhere, stay there for a year, year and a half, and today a lot of younger people want to move around, even if not moving from city to city they are moving around the city,” Eppers said, according to CNBC.
Considering millennials are moving to places that are both affordable and experiencing job growth, there are certain markets that are seeing greater popularity among these younger renters. Realty Trac said the top five rental markets for millennials include Denver County in Colorado and Duval County in Florida, which includes the Jacksonville metro area.
Investors looking into buying Jacksonville investment properties or other homes in these highly ranked areas should consider working with an experienced real estate investment firm to ensure greater return on their investments.