If you read various news articles on millennials, the generation born in the 1980-90s, you might get the impression that this generation is less interested in homeownership than previous generations or that millennials can’t actually afford to become home buyers.
This stereotype arose for a few reasons. First, rising home prices have made buying a house difficult without going into significant debt or without help from family and friends.
Also, many millennials put off marriage and children, a major reason people buy a home in the first place. This situation inspired some baby boomers to consider millennials to be irresponsible and incapable of doing the work needed to settle down and pay for a mortgage and family. This unfair assessment of many millennials has remained strong despite evidence to the contrary.
In fact, in 2021, the combination of younger millennials (ages 23-31) and older millennial buyers (ages 32-41) accounted for 43% of houses sold, according to the National Association of REALTORS®.
Even though wages have remained stagnant since the Great Recession and costs have risen, millennial home ownership is still just as possible for this generation as for other generations.
If you are a millennial ready to buy a house, the best advice is to research the real estate market, eliminate debt, save for a down payment, and use a real estate agent. Homeownership is not out of reach!
Research the Real Estate Market
When you’re ready to think about buying a home, use the Internet to your advantage. According to the National Association of REALTORS®, young adults are the most likely generation to find their homes on the Internet. One NAR report shows that 65% of younger millennials found their homes online.
Online shopping has several advantages compared to word-of-mouth, working with ‘just any’ REALTOR®, or recommendations from friends and co-workers.
First, you can research home values and home prices in various markets in detail. You can also look at the labor market, school reviews, and growth expectations in that housing market. Because quality of life is a millennial value, understanding the culture in the area is part of the home-buying experience.
Although millennial homebuyers gravitate toward small towns and suburbs, many still flock to big cities. Research can allow you to see crime rates and historical home prices, where the best neighborhoods are located, and what kind of vibe you can expect.
Because you’re buying during a competitive market, you can also use apps that let you know when houses go on the market and immediately schedule visits and showings.
Using the Internet can also help you to pay a reasonable price for a home. Price comparison tools can ensure that the inflated home value numbers on some real estate sites don’t trap you in unnecessary debt.
While researching houses, you want to consider more than the initial cost of the home. Because you don’t want housing costs to be more than 25% of your take-home pay, you have several other factors to consider. Research property taxes, homeowners’ insurance, interest rates, and private mortgage insurance (PMI). If you decide to move into a condo or townhome, you’ll also need to add in the cost of the HOA fees.
Finally, you’ll want to research lenders and mortgages. Rising interest rates have squeezed the markets, but that could change housing from a seller’s to a buyer’s market. However, you want to ensure you get the best rates possible with a reputable, reliable company.
This sort of research is available to all ages. Still, millennial home buyers tend to take advantage of the information, providing them with the insight they need to negotiate deals and make strategic purchases.
Eliminate Debt and Save for a Down Payment
Debt, especially student debt, has been a major factor in keeping potential millennial home buyers from making a home purchase. In fact, student debt hovers around $1.6 trillion. This incredible financial burden has kept an entire generation from jumping headfirst into another loan.
During the pandemic, many used the shutdowns to their financial advantage. Young people moved back in with their parents and used the time to pay off debt and save for a down payment. Eliminating the high cost of rent plus saving made buying homes possible for many millennials.
This type of financial planning is necessary to achieve the American dream of owning your own house. Even millennials without student debt typically have to save for almost eight years to achieve a 20% down payment in the current housing market.
In addition to student debt, millennials should eliminate credit card debt in a time of rising interest rates and attempt to avoid car loans or other similar debts that compete with the money needed to purchase a house.
Finally, if you have family and friends willing to back your dreams, you can turn to them for assistance with the down payment. If you do this, have your parents check the tax benefits of gifting larger sums to their children! Your home-buying process can also benefit them.
The financial stability of older generations isn’t as present for contemporary home buyers. Still, wise spending and saving money in your bank account can allow you to become a homeowner even in the current economic climate.
Use a Real Estate Agent
In addition to using the Internet, millennials are the most likely generation to use a real estate agent to purchase a home. The recent NAR report shows that 87% of millennial home buyers used an agent (88% of older millennials and 92% of younger millennials).
Using agents to buy a home has several advantages.
First, you aren’t just competing for homes with your contemporaries. You are in the same market as younger boomers looking to downsize. Gen Xers are buying the more expensive houses, leaving millennials and boomers to buy homes in similar price ranges and demographics. An agent will help you negotiate a good price and spend focused time working on your behalf.
An agent will also make sure that all of the paperwork surrounding homeownership is done properly. The stress of finding a house, securing a loan, and potentially moving is difficult enough. Struggling through the minutia of real estate law and paperwork is just added anxiety! Paying for an agent is far more cost-effective in the long run and makes certain you don’t have legal issues in the future.
Don’t let the housing market scare you.
Although the average age of first-time buyers has risen, in the last year, millennials have surpassed Gen Xers and boomers in purchasing homes. Despite increasing interest rates and home values, overall inflation, and stagnation in median income, millennials can and now are moving into homeownership at similar rates compared to their parents.
In the past year or so, millennials have shown the resilience of previous generations, not allowing difficult circumstances to keep them from achieving their dreams.
Millennials prove that careful use of modern research tools and resources, saving even when money is tight, and strategic reliance on family can make home buying possible. By having a millennial REALTOR® on your side with experience and perspective to share, you can approach the entire process of finding and buying a home with confidence. Your dream home awaits… contact us to get started.
