A millennial's guide to homeownership.
The millennial generation is the largest generation in United States history. According to the US Census Bureau:
“[Millennials] born between 1982-2000, now number 83.1 million and represent more than onequarter of the nation’s population. Their size exceeds that of the 75.4 million baby boomers.”
If you are one of the millions of millennials who has seen their peers begin to buy homes recently and are wondering what it would take for you to do the same... you’ve found the right eGuide! There are many stereotypes and myths about the millennial generation as a whole, AND about what it takes to buy a home in today’s market. These myths have prevented many millennials from even considering homeownership as an option for them and their families. The goal of this eGuide is to provide you with the information you will need to make the best decision for you and your family in regards to homeownership. We will break down the myths and stereotypes that have long been believed to be true, as well as shed light on the opportunity you have to build wealth using your monthly housing cost.
If it seems like all your friends are buying a house... it’s because they are! But don’t worry, you’re not alone if you haven’t.
There has been a lot of talk about how, as a generation, millennials have ‘failed to launch’ into adulthood and have delayed moving out of their family’s home. What doesn’t seem to be mentioned in the same context, however, is the large number of millennials who have moved out of their family’s home, but have been renting an apartment, condo, or even a house!
Many experts have looked at the homeownership rate among millennials and have questioned if they even want to own homes! The great news is that not only do millennials want to own... they are flocking to the real estate market in larger numbers every year!
Buyers aged 18-34 years have comprised the largest share of first-time homebuyers at roughly 50-60% for the last few years. In 2017, buyers aged 25-34 years accounted for 65% of first-time home buyers, compared to 50% in 2005.
According to the National Association of REALTOR’S® latest Profile of Home Buyers and Sellers, the average age of a first-time home buyer in 2017 was 32. This generation will continue to be the topic of conversation A LOT when it comes to housing as more and more enter ‘average home buying age’.
In a group of people with such a wide age range (18-36 according to the Census), it is impossible to draw conclusions about this generation as a whole, despite what many have tried to do.
Many experts have begun to realize that there is a noticeable difference between the behaviors and experiences of this generation, and have therefore divided them into ‘young millennials’ (18-26) and ‘older millennials’ (27-36).
No matter which group you find yourself in, you no doubt have peers that fit into the other category and may even identify with different characteristics from each group.
One of the many reasons that it has been easy for experts to lump all millennials together is the fact that 66% of millennials are under the age of 30, with 22% falling under the age of 25, according to a study by NerdWallet.
With the majority of the generation still in their 20s and either not ready to or not in a position to make huge life-changing decisions (such as buying a home or starting a family), it has been easy for those who follow trends to not notice the progress ‘older millennials’ have already made.
Whether pushed into the zone or a willing participant, many ‘older millennials’ are aging into the ‘Responsibility Zone,’ or the age range when responsibilities start to dictate behaviors, such as:
• Moving out of the house
• Getting married
• Buying a home
• Having children
And not necessarily in that order!
You may have noticed that many of your friends and family members have started to make pretty big decisions all at once. There are many millennials who are crossing all four of these major life events off their list in a two-year span. If you blink you might miss it!
Census data also shows the median monthly rent is rising year after year (see chart below):
To escape that cycle, consider purchasing a home so you can lock in your monthly mortgage payment and avoid future increases. Why pay more for less? Instead, invest in homeownership, which acts as forced savings that comes back to you in the form of equity, boosting your longterm wealth gain.
Student Loans are Preventing Millennials from Buying
Millennials are on track to becoming the most educated generation in history. This means they are also the generation with the most student debt. Depending on the type of degree earned, as well as the prestige of the institution attended, there are some millennials who graduate college with what equates to a mortgage payment. But that’s not the case for all.
You Need a 20% Down Payment to Buy a Home
Gone are the days of 20% down or no loan, but recent surveys reveal that many Americans are not aware that programs exist to put down less.
Fannie Mae’s article, “What Consumers (Don’t) Know About Mortgage Qualification Criteria,” revealed that “only 5 to 16% of respondents know the correct ranges for key mortgage qualification criteria.”
The survey results revealed that consumers often overestimate the down payment funds needed to qualify for a home loan; 76% of respondents either don’t know (40%) or are misinformed (36%) about the minimum down payment required.
You Need ‘Perfect Credit’ to Buy a Home
What is a credit score? According to Investopedia, “a credit score is a statistical number that depicts a person’s creditworthiness. Lenders use a credit score to evaluate the probability that a person repays their debts. Companies generate a credit score for each person with a Social Security number using data from the person’s previous credit history.
A credit score is a three-digit number ranging from 300 to 850, with 850 as the highest score that a borrower can achieve. The higher the score, the more financially trustworthy a person is considered to be.”
Our speciality is listening to your goals and helping you create a written plan of action while keeping you well-informed of the next steps. Let us guide you through your real estate process!