There is a perception that millennials are breaking the habits of their parents and grandparents when it comes to home buying today. It seems as though those born between 1981 and 1997 are renting longer, living with parents and may even be weighed down with student loan debt with a lack of interest in buying a home for themselves.
However, a NerdWallet analysis examined a number of data and surveys from government agencies and private organizations that found many of these common assumptions about millennials to be false. The research showed that a majority of millennials would prefer owning a home to renting, but appear to be postponing due to real, as well as perceived difficulties in affording a home.
The Millennial Market
- 66 Million individuals in 24 million independent households make up the U.S. millennials. (1)
- The median income for a millennial over 25 years old is $38,220. (2)
- The median age of a first-time home buyer in 2015 was 31 years old. (3)
- Two-thirds of millennials haven’t yet reached the age of 31 and 22% are under 25. (4)
- Millennials are expected to form 20 million new households by 2025. (5)
- The median rental period in 1980 was 5 years, as opposed to 6 years today. (6)
Truth: Millennials Want to Buy Homes
In a 2014 survey by Fannie Mae, it was discovered that a majority of millennials consider owning a home
to make more sense than renting- for both financial reasons as well as lifestyle reasons. Some reasons included control over their living space, flexibility in future decisions,
security, privacy and taking pride in having a nice home. In this survey, 49% said their next movie would likely be to own a home.
Overall, the Fannie Mae survey painted a picture of a positive outlook on buying a home. Even experiencing the housing market collapse in the recent recession, two-thirds of current millennial renters said that now was a good time to buy a home.
“There’s a strong indication that millennials do want to become homeowners, which is quite different from what we’ve heard.” – Chris LingMortgage Manager at NerdWallet
Top Reasons Why Millennials are Postponing
Some of the home buying hesitation can be derived from a lack of faith in their own financial ability to be able to purchase a home. The number one response when young renters were asked their primary reason for renting, was that they are making themselves financially ready to own. In the Fannie Mae survey mentioned above, 57% had cited financial reasons for not buying a home.
Biggest Obstacles to Home Ownership
- Credit history is insufficient or score is too low.
- Having the required down payment/closing costs.
- Income is insufficient for required monthly payments.
- Existing debt is too high.
Resources to Help Millennial Homebuyers:
There are some realities that are undoubtedly restricting to new homebuyers. However, we don’t believe that a lack of access to knowledge and resources should be one! Here are our picks to help you get on the path to home ownership:
Less-than-excellent credit options: Federal Housing Administration loans. They work with applicants who have lower credit scores and small down payments. With anticipated demand from millennials some are offering conventional loans with 97% financing.
Whatever your challenge is, the wall to get over may not be as high as many millennials perceive them to be. Low savings or poor credit might seem impossible to overcome, but there are a variety of resources available to help today’s millennials get on the path to a new home.
If you are looking to buy a home and need some help navigating the process, get in touch with us at The Core Group.
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