Millennial homebuyers can’t get a break
Wednesday, October 11, 2017
At last, the large influx of millennials into the housing market has arrived. Unfortunately, the housing market at present isn't ready for them.
As with the cost of education and post-recession job prospects, the nation's largest age cohort find themselves yet again thwarted by ill timing. Housing inventories are at historic lows, and prices are at their highest levels since before the recession. Millennials with the means and motivation are ready to give the industry the boost it's been waiting for, but face a number of hurdles to homeownership.
Now that the oldest millennials have reached their mid-30s, more are leaving home, getting married and starting families. Especially for those with children, a college education and a good income, purchasing a home has become a priority. While only a portion of the total cohort, millennials seeking to purchase a home now make up the largest segment of all present homebuyers (42 percent) and of all first-time buyers (71 percent).
According to the Zillow Group's recently released "Consumer Housing Trends Report 2017," however, millennials are the most frustrated generation among current homebuyers and sellers. Those looking to buy complain of having trouble finding a desirable home in their price range, and those looking to buy up say they have a hard time selling at the price they want and in the time frame they need in order to snag their next home in today's fast-paced market.
Findings from the National Association of Realtors' "Homeownership Opportunities and Market Experience (HOME) Survey" for the third quarter 2017 reveal the source of millennials' frustrations:
- 65 percent say they have seen housing prices increase in the past 12 months
- 57 percent believe they will continue to increase in the next six months
- 62 percent are less confident that now is a good time to buy
- 38 percent believe now is definitely not a good time to buy a home
Increased prices make it even more difficult for millennials not only to afford a home, but also to qualify for financing. Zillow reports that millennials are more likely to obtain a mortgage in order to buy a home.
Yet more than half (58 percent) of those participating in the NAR HOME survey said it would be very difficult or somewhat difficult for them to qualify for a mortgage, and with rents and other expenses increasing at the same time, almost two-thirds (62 percent) said it was very difficult or somewhat difficult for them to save for the necessary down payment.
Availability of desirable properties is another challenge for millennial buyers. Although younger millennials are the most likely to buy in urban areas, the majority of millennial homebuyers are moving to the suburbs, especially those with children. Zillow's study finds they are looking for a single-family home and place a high priority on purchasing a home in a safe neighborhood and with good schools.
But with nearly 9 in 10 current homeowners (86 percent) planning to remain in their current home, such housing is scarce and sells rapidly and usually at a premium when it does come on the market. Unlike previous generations who relocated to newer communities, millennials are more likely to purchase a home in the city or town where they now live, which reduces their choices even further.
On the face of it, millennials are quite active in the housing market. The latest data from the Ellie Mae Millennial Tracker shows loan activity for millennial homebuyers remained fairly constant in August, with the cost of borrowing only slightly more than it was a year ago.
Their sheer numbers, though, disguise the fact that a larger portion wishes to buy a home than are able. Market analysts point out that bodes well for future growth for some years to come, but that will only happen if the industry can solve the problem of how to address the demand for affordable, desirable housing.
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