How Millennials are Transforming Real Estate
After years of sitting on the sidelines, Millennials are getting into the housing market, in full force. The National Association of Realtors (NAR) reported in the 2018 Home Buyer and Seller Generational Trends Study, Millennials made up the largest share of home buyers compared to any other generation for the fifth consecutive year. Millennials are facing a far different housing market than previous generations and thus are changing the way the game is played in several different ways.
Smaller Down Payments
As Millennials simultaneously face rising rents, home price appreciation, and record-level student debt, saving for a down payment has become increasingly difficult. Although many prospective home buyers could easily qualify for mortgage financing because they are employed and have good credit, they are unable to save up for the down payment. Real estate expert Samantha DeBianchi, featured Million Dollar Listing Miami, told Fox Business, “home buyers are being allowed to put down as little as 3% […] we are seeing that last year and we are seeing that again this year. You’re looking at 3%, 5%, 10% down.”
Home buyers looking to put down a smaller down payment are no longer limited to the government-sponsored FHA Loan, with down payment requirements as low as 3%. Today, many conventional options, like the Freddie Mac HomePossible loan or the Fannie Mae HomeReady loan, allow for low down payments. While the FHA loan will require a Mortgage Insurance Premium (MIP) and mortgage insurance throughout the life of the loan, some conventional options include cancellable mortgage insurance, once the homeowner has built up a certain amount of equity in the home.
Prefer to Use Realtors or Real Estate Agents
The NAR also found that younger home buyers are more likely to seek help from Realtors or real estate agents, compared to other generations, with 90% of Millennials purchasing through and agent. NAR chief economist Lawrence Yun explained, “Realtors throughout the country have noticed both the notable upturn in buyer interest from young adults over the past year, as well as mounting frustration once they begin actively searching for a home to buy.”
The preference to partner with a Realtor or real estate agent may be due to challenging market conditions. Millennials understand that a Realtor or real estate agent is their biggest advocate when it’s time to make an offer, and can help them through the process, especially when they are a first-time home buyer.
Less Suburban Migration
Previous generations tended to follow the trend of renting near city centers and then migrating to the suburbs to buy. Today, many Millennials are choosing to stay closer to city centers. The lack of suburban migration is due to many factors including, delaying marriage and children, more job opportunities near city centers, and lifestyle preferences. Many Millennials prefer walkability and accessibility versus the long commutes to and from work and entertainment.
The preference to stay closer to city centers is also changing the types of homes Millennials buy. Detached single-family homes are common in suburban sprawl, but near more crowded city centers home buyers are more likely to find townhouses and condos.
As the way we buy houses changes, it’s important to work with a lender that is able to change with it. We work with buyers to explore down payment solutions and have experience with lending for all types of properties. Whether you are looking to buy a home soon, or just want to know more about your buying process, the right lender will set you up for continued success.
Sources: Fox Business, HousingWire