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2019: The Year of the Millennial Home Buyer

Millennials—a term coined by Neil Howe and William Strauss to define people born between 1980-2000—inherited the ‘Largest Generation in the United States’ title just this year. Their parents, the baby boomers, bought their first homes in their 20s. Unlike Boomers, millennials (for the most part) resisted homeownership, renting instead. Now in their 30s, millennials are finally taking advantage of the hot housing market. The millennial generation, composed of approximately 75 million people in the United States, is the driving force behind the current and continued housing boom.

Shocking, right?

What was the hold up?

Homeownership among Baby Boomers, Gen Xers, and Millennials in 2015, from Urban Institute's Millennial Homeownership report
Figure 1

While their parents were buying first homes in their early 20s, millennials are becoming first time homebuyers at about 30-years-old and at a 9% LOWER rate than Boomers and Gen Xers did back when they were 30. These rate changes, shown in Figure 1, have been caused by several factors:

#1 Factor – Student Loan Debt

Millennials have student loan debt, which prevents them from saving up large sums of money. On average, every millennial enters the workforce with $30,000 or more in student loan debt. This debt stops many millennials from being able to make sizable down payments on their homes and has injured their mortgage qualifications. Student loan debt may delay a millennial’s home-buying plans by as much as seven years.

#2 Factor – Starting Families Later

Unlike previous generations, many millennials didn’t get married and have children in their 20s. As shown in Figure 2, they waited to start their families. Families are a big reason that people decide to buy their first home. “Home buying is often linked to life events like getting married or having a baby, both of which are happening later in life, and many people are choosing not to take these steps at all,” says Tendayi Kapfidze, Chief Economist at LendingTree.

Marital Status among Household Heads Ages 18 to 34, from Urban Institute's Millennial Homeownership report
Figure 2

The percent of married millenials is similar to the number of young adults buying homes. “The Urban Institute found 37 percent of 25- to 34-year-olds were homeowners in 2015, and the Pew Research Center found an identical percentage of millennials were married in 2017,” writes US News Contributor, Maryalene LaPonsie.

#3 Factor – Lack of Affordable Home Inventory

According to Zillow, over the last five years, prices for starter homes have increased 57%, while inventory is down 23%. “That’s way below what we need for the longer perspective given our population,” he said. In recent years, homebuilders have been focused on luxury and rental properties, and options are sparse for new homebuyers. New construction can be too expensive for millennials, who are trying to pay down their student loan debt.

Housing Supply Elasticity, from Urban Institute's Millennial Homeownership report
Figure 3

Figure 3 (above) shows the relationship between homeownership among young adults and housing supply inelasticity in the 2012–2016 American Community Survey. Cities with lower housing supply elasticity have lower homeownership rates.

What made millennials enter the housing market?

This influx of millennial home buyers fuels market competition and home pricing. Given the stronger economy and lower mortgage rates, it’s no surprise that more millennials are ready to buy.

Mortgage rates rose almost a full percentage point over the course of 2018. But this year, rates shouldn’t jump back up too quickly and we should be in a steadier rate environment,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Honestly, I expect that we’re going to be in a pretty good position for the spring housing market with rates a little bit lower than we have seen just a few months ago.” Sheryl Palmer, Taylor Morrison Home CEO, sees major opportunity for the US housing market over the next decade with the millennial generation hitting prime home buying age.

Where can millenials turn for better real estate options?

The Marti Hampton Team has a large selection of listings that would make great homes for first time buyers. Our team acquires inventory for every potential buyer, no matter their price point. We are able to show you homes all over the United States that have not even hit the market yet through our partnership with Coming Soon Homes.

Millennials, we’ve got plenty of affordable opportunities for you! Let’s talk about your options.

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