Millennials and the Housing Market: Study shows there is hope for Gen Y’ers looking to home buy

By Katie Snyder
Many young people dream about the day when they will start hunting for their own home, what
it will look like, how big it will be. After all, that is part of the “American Dream,” right?
At least that was the case until the financial crisis of 2008.

“The recession hit everyone hard,” said Tara Alves, realtor with HomeSmart. “Although we’ve
seen the economy and housing market slowly begin to recover, truth is many millennials have
seen their family members or those they know lose a home and struggle and some would rather
play it safe.”

And it shows.

A recent survey showed nearly 62 percent of millennials would rather rent then own in 2014 and
of those individuals polled, two-thirds said they currently rent with family members or
roommates.

That coupled with fear with large amounts of student’s debt, sky rocketing home values,
hovering mortgage rates and unemployment rates at an all-time low, and for many millenials the
idea of owning a home isn’t, in many cases, a realistic option.

But there is hope, says Alves.

Trulia’s American Dream Survey revealed that consumer optimism about home ownership is
rebounding as the housing market recovers even among young adults who were often pegged as
renters for life during the recession. In fact, 72% of millennials said that homeownership is still
part of their personal “American Dream.”

“There are so many things about owning a home that people can’t get from renting,” said Alves.
“Historically speaking, home ownership has been a proven road to retirement in America.”

While renting a home often comes without the responsibility of paying for repairs and property
taxes, Alves admits that buying a house, does have its benefits.

“Owning a home allows millennials to start early with building equity,” said Alves. “The tax
benefits and ability to write off the interest on your loan are also hugely beneficial.”

So, if buying a home is your goal, what should you know?

Alves advises starting with these three steps:
1. Contact a realtor or loan officer ahead of time. Both can provide the insight needed to
prepare yourself to be in the best position possible when it comes time to purchase, as
well as help set expectations for the process.
2. Reducing debt and improving your credit score. Both are critical aspects to qualifying for
a loan, as well as qualifying for the best rates and loan programs. A lender can look at
your credit score and determine if you will need to have funds saved for down payment
and reserves.
3. Once your debts are out of the way, start saving. How much depends on the loan type
you’ll use and how much you’re borrowing. There are many programs out there right
now, including the “Home in 5,” which helps with down payment costs, but regardless,
you need to have funds saved for down payment and reserves.

And when looking for a home, what should potential buyers consider?

“In the past, part of the “American Dream” meant owning your own house with four walls and a
grass yard,” said Alves. “Today, millennials are seeking different housing preferences than
previous generations.

If you’re buying today for yourself and your family, you want a home that will make you happy
for the next few years.

“Buyers should consider their needs for the next 3 to 5 years, at a minimum,” said Alves. “What
amenities you might need, if you have children what schools are near, how far your commute
will be and of course, any specifics in a property you desire are also things that should be
considered.”

After deciding what type of home suits your needs, talk to an expert to determine what you can
afford.

According to mortgage experts, if you’re using FHA financing, your home payment can’t exceed
31 percent of your monthly income. But, with some mitigating factors, FHA will let you go
higher. But for conventional loans, they recommend home expenses should not exceed 28
percent of your gross monthly income.

“Don’t rely on the internet to provide you information on lending and interest rates,” said Alves.
“Again, I advise talking to a professional realtor to help guide you and prepare you for what to
expect before you start making any decisions.”

There’s a lot to think about when buying your first home, but remembering these tips can help
you navigate the process and avoid potential minefields

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