Millennials are Buying Real Estate and finally entering the home-buying market
There’s a new category of millennials- the prodigal millennial. These young folks and couples, who are yet to hit their third decade in life, are taking the home buying market by storm thanks to low mortgage rates of around 3%, the government’s push to make credit more affordable, and the chagrin of having to face landlords who increase rents at a whim without the corresponding creation of equity.
Listening to Kathleen Hart, who together with her husband Devin Wall just completed the process of purchasing a condo overlooking the Columbia River in Wenatchee, Washington, gives you some perspective. She said they had enough of paying rent and living in a crowded place that was not even their own.
Erin Beasley and her fiancé sealed a deal on a condo in Washington D.C. in January for similar reasons. After paying rents that continually increased for five years, they simply had enough. They wanted a place they could call their own and make changes to without worrying about the landlord.
For a long time real estate industry economists predicted that millennials entering the home buying market would make up 38% to 40% of all deals, but this had never been come to fruition. New millennial buyers have always stood at a paltry 10%. The emerging trend indicates that things are changing for the better, and it may be time to start shopping for a deal.
According to Redfin, Millennials are Buying Real Estate and the numbers of first-time buyers are soaring. For the first time they have hit a whopping 57%, which is the highest on record in the recent past. Requests for information on buying a first home have also jumped to a high of 27% in January alone. Nela Richardson of Redfin says that these numbers indicate a paradigm shift.
The Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey holds a monthly survey where they question at least 2000 real estate agents nationally. Their research indicates there is heightened activity among first-time home buyers hitting a percentage point of 36.3, which is unusually high in comparison to the past.
Subjective reports collected from real estate brokers, randomly nationwide, point to the same direction, increased activity among first time home owners. Gary Kassan who works with Pinnacle Estate Properties in Los Angeles reveals that close to 50% of his new clients are first time home buyers. The same report is true with McEnearney Associates Inc. Realtors in McLean, Va. Their real estate agent Martha Floyd said she is serving “an unusually high” number of young, first-time buyers in comparison with the same period one year ago.
If these early indicators are pointing to an emerging trend, there must be something that is catalyzing the events, such as the fall of interest rates, rising house rents and higher demand.
However, there could be other issues at play. Over the last few days, some of the leading financiers for first time home buyers, such as the Federal Housing Administration and giant investors Fannie Mae and Freddie Mac, have all bent their rules with the FHA. In particular, reducing federal mortgage premiums, and Fannie and Freddie knocking down their payments to a bare 3% from 5%.
There is also an improved affordability as price increases that were witnessed in the past have tended to stabilize. Consumer education has also informed younger home buyers of the availability of a large spectrum of different financing programs that are available thanks to local and state housing agencies.
Hart and her spouse did not waste time in grabbing an available helping hand for new buyers, courtesy of the Washington State Housing Finance Commission. This program affords buyers a second mortgage loan that comes interest-free, which is helpful when you are making a down payment or dealing with closing costs. There are several other such state agencies that offer first time home buyers assistance.