By Brian McGowan
When it comes to home buying, many real estate professionals believe that millennials don’t want to own their own. There is no doubt that first time home purchases are down significantly. In fact, it is down across all age groups, dropping from 69% in 2004 to 63.7% in 2015. The National Association of Realtors reports that first time home buyers are down 8%. As of March 2016, first time home buyers made up 32% of all purchasers compared to 40% in 1987. At the same time, millennials continuing to live at home has increased 15%.
But these statistics don’t mean that millennials don’t want to own their own home. Actually, the opposite is true. FannieMae conducted a national housing survey which demonstrates that millennials do want to purchase real estate and are, in fact, moving toward home ownership.
Facts about millennials and home purchasing
- There are 66 million millennials in the U.S.
- 24 million millennials live in independent households. That number is expected to grow by 20 million households by 2025.
- The median income for millennials 26 years and older is $38,220.
- The median age for first time home purchasers was 31 years of age in 2015. In 1970-74 the age was 30.6.
- Two thirds of U.S. millennials are 31 years of age.
- The median number of years a millennial rents before buying is 6 compared to 5 years in 1980.
When the survey asked millennials about their outlook on home buying, 93% said they wanted to purchase a home to have more control over their living space. 90% said that owning a home would provide them a sense of privacy and security. 81% said they wanted a nicer home. 75% felt home ownership would make them feel more engaged in their community and 53% said that owning a home would provide more flexibility in future decisions.
Credit score, down payment and their ability to obtain and make monthly payments on a mortgage seems to be the biggest impediment for millennials interested in purchasing a home. But with interest rates at an all-time low and incentives for first time home buyers readily available, millennials might not realize that they can afford to own their own home.
While the preference of lenders is for a home buyer to put down 20% of the purchase price, according to RealtyTrac, many lenders will underwrite loans with a down payment of 3% to 5% of the home’s purchase price if the first time home buyer has a good credit score.
There are realities that may keep some millennials from home ownership, but for most, the barrier seems to be lack of knowledge about the home buying process. Millennials with lower credit scores and smaller down payments can take advantage of Federal Housing Administration loans.
While homeownership may not be for everyone, as a millennial who owns his own home, I am happy to share my knowledge with other members of my generation who want to purchase a home but might not know where to start.
If you are interested in purchasing a new home call me at 718 816-7799 or email me at Brian@CasandraProperties.com.