Letter to a Millennial Future Home Buyer
Dear Millennial Future Home Buyer:
This is shaping up as your year! Congratulations. You and your older siblings are jumping into the housing market en masse. And it’s happening for all sorts of reasons, including the fact that you’re getting older and wiser.
Approximately 43 million of you are 25 to 34 now. (Hey, where did the time go?) That’s the age when Americans typically buy their first homes, and we expect nothing less of you. You and your cohorts outnumbered all other age groups of home buyers last year—even though not as many of you were buying as usual in a healthy economy.
So it is no surprise to us that in June you officially became the age group most likely to purchase a home this year.
Why, you may be wondering, did it take so long for all you guys to get up to speed? There are plenty of reasons, to be sure, but the key problem was pure economics. You and your peers suffered big time during the recession. Your unemployment rate was higher, so you invested in more education or sought refuge in your parents’ home.
But that negative story is so 2013. Over a third of all jobs created in the past 12 months were filled by you. And that context is driving many life events. Can you even count how many weddings you’ve been to so far this year? And how about the baby showers? You might even have to subscribe to cable just for the Disney Channel.
Nothing drives demand for housing quite like life events, mostly marriage and parenthood. Your parents, the baby boomers, made the 1970s and 1980s huge years for housing—first for apartments and then for homes. Sound familiar?
Over 60% of you are looking at real estate online each month. More and more of you are waking up to the fact that rents are rising now faster than home prices. Because homeowning builds wealth over time, when home prices, rents, and mortgage rates are all going up—like they are now and will be for the next several years—there is a substantial opportunity cost to waiting to buy.
Sure, you’ll have some challenges. Average student debt is around $30,000, and that will affect your debt-to-income ratio and therefore the mortgage amount you can qualify for. But the good news is that most of you have very little debt outside of student loans.
According to what your peers have told realtor.com® in June, the No. 1 obstacle holding you back is finding a house that meets your needs. That’s no surprise, since the supply of homes on the market is very tight.
The best advice I can give you on the home-buying journey revolves around people and preparation. On the people side, find a local expert Realtor® who speaks your language, and then find a lender or mortgage broker to help you get pre-approved for a mortgage. These professionals will help you understand what you can afford, and that translates into the trade-offs you will need to make between your wants and needs. And yeah, there will be trade-offs. With huge upsides, however.
Preparation is all about doing your homework: preferences, household needs, realistic budgets. Then narrow down the neighborhoods that interest you most. If you can’t decide, consider a trial run on Airbnb!
One more piece of advice: Get ready to party! Almost two-thirds of you who are looking for a home to buy intend to purchase in the next three months, so plan on attending a lot of housewarmings this fall.
Welcome to the housing market. We’re glad you’re finally here.