OWNING A HOME IS OBTAINABLE FOR MILLENNIALS – JUST ON DIFFERENT TERMS THAN THE GENERATIONS BEFORE THEM

Posted by Mike Brown Group on Friday, June 7th, 2019 at 1:38pm.

Couple in kitchen with a tablet

Livability.com recently surveyed more than 1,000 Millennials (a.k.a. generation Y – those born between 1981-1996) about what was important to them when they considered relocation and home ownership. Boise beat out more than 1,000 cities with populations between 20,000 and one million to secure the No. 1 spot in their Top 100 Places to Live list. Livability.com partnered with the market research company Ipsos to conduct their study. The standout answers included housing prices, job opportunities and affordability and all were factored into the rankings. 

The write-up states, "Boise has become a magnet for people looking for a tight-knit community, great job opportunities, easy access to the outdoors — and perhaps most importantly, a much lower cost of living than many larger and comparably sized cities…Young families are drawn to Boise because it’s one of the safest cities in the world. In addition, Boise’s combination of affordability and do-it-yourself spirit make it the perfect place for creatives (check out the awesome comedy scene), entrepreneurs and startups. The tech scene here is growing fast, with new talent flocking to the city, eager to find a work-life balance that allows for plenty of fresh air and adventure."

It’s long been projected that Millenials are destined to dominate the housing market in upcoming years. Now, new data from Realtor.com reveals that it's finally happening. Millennials are buying houses - lots of them.

According to Realtor.com, in January 2017, Millennials surpassed Generation X as the group that was responsible for the most new mortgages. Since then, Millennials' share of the mortgage market has continued to rise. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers.

What's new is that Millennials also finally surpassed older generations in the total dollar amount of those mortgages. According to the data, Millennials now represent the largest dollar volume by age group as well.

"In November 2018, Millennials finally overtook Generation X as having the largest share of new loans by dollar volume, with a share of 42% in December, compared to a share of 40% for Generation X and 17% for Baby Boomers. This indicates Millennials are willing to take on larger mortgages than any other generation to fulfill their dreams of homeownership," the company writes.

Realtor.com notes in addition to increasing their buying power and taking on larger mortgages, data reveals Millennials have consistently made lower down payments than other generation since 2015.

In fact, Millennial down payments averaged only 8.8% in December 2018, compared to 11.9% for Generation X and 17.7% for Baby Boomers.

Odeta Kushi, a senior economist for First American, says… While this generation is often “mistakenly portrayed” as showing a preference for renting, Kushi notes this is not correct; Millennials still appreciate buying a home but have different motivations in doing so:

"Because they grew up in the wake of the housing bust, Millennials are less likely to consider homeownership as a means of building wealth and, therefore, choose homeownership based more on whether homeownership fits their lifestyle or notOur research shows that, because lifestyle choices are the most important factors influencing the decision to become a homeowner, it is reasonable to expect the homeownership rate for Millennials to increase as more get married and form families."

While the homeownership rate for young adults is currently quite low, with just over one-third of adults under 35 owning a home, the potential for home sales is high. Kushi observes that more than half of all the purchase mortgages guaranteed by Fannie Mae and Freddie Mac in 2018 went to first-time homebuyers. "Many people are basically skipping starter homes; they're renting until their 30s, and that first house they buy is a million dollars, and they just are not even buying the $200,000, $300,000, $400,000 home, which is a total mind shift as compared with previous generations. So they're still buying homes — they're just buying them later and buying them bigger." 

Toll Brothers, the largest US luxury-home builder, said that nearly a quarter of its 2017 sales were to those 35 or younger, Bloomberg's Prashant Gopal reported. "These people, who may each have 10 years of work under their belts, can afford a first home that is more luxurious than what one thinks of as the typical starter home," Fred Cooper, Toll Brothers' senior vice president of investor relations, told Gopal. 

The Idaho Statesman recently reported that the Millenial generation is in its prime household formation years, yet Millenials view home ownership in a more utilitarian way: they only require 3.14 people times 477 square feet (or a 1,4997 square-foot house).  In 2017, the average square footage was 2,631 with 3.14 individuals, or 838 square feet per person. Most Millenials were raised in households with two incomes. These experiences will likely lead to a different perspective on household formation and housing.

Regardless of hurdles like pricing and affordability for some Millenials, home ownership in the Treasure Valley is still attainable, especially along the perimeters – like Kuna. Canyon County is quickly catching up with Ada County pricing, yet still provides many options for home ownership and staying within pricing brackets that are still attainable for Millenials. First-time homebuyers within the state of Idaho have access to helpful programs like Idaho Housing’s loan programs (including down and closing cost assistance). Our friendly and knowledgeable agents here at the Mike Brown Group can guide you through the process of buying a home here and help you connect with a local lender who can outline all financing options available to you. Give us a call today! 

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