- ‘Millennials’ are defined as 18-36 year olds according to the US Census Bureau.
- According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 31 years old.
- More and more ‘Old Millennials’ (25-36 year olds) are realizing that homeownership is within their reach now!
A recent report released by Down Payment Resource shows that 65% of first-time home buyers purchased their homes with a down payment of 6% or less in the month of January. The trend continued through all buyers with a mortgage, as 62% made a down payment of less than 20%, which is consistent with findings from December. An article by DS News points to the new wave of millennial home buyers:
“It seems that the long-awaited influx of millennial home buyers is beginning. Ellie Mae reported that mortgages to millennial borrowers for new home purchases continued their ascent in January, accounting for 84 percent of closed loans.”Among millennials who purchased homes in January, FHA loans remained popular, making up 35% of all loans closed. Ellie Mae’s Executive Vice President of Corporate Strategy Joe Tyrrell gave some insight into why:
“It is not surprising to see Millennial borrowers leverage FHA loans because they typically offer lower down payments and lower average FICO score requirements than conventional loans. Across the board, we're continuing to see strong interest in homeownership from this younger generation.”
Bottom LineIf you are one of the many millennials who is debating a home purchase this year, let's get together to help you understand your options and set you on the path to pre-approval.
- “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
- At 93%, the top reason Millennials choose to buy is to have control over their living space.
- Many Millennials who rent a home or apartment prior to buying their own homes dream of the day that they will be able to paint the walls whatever color they'd like, or renovate an outdated part of their living space.
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! We recently shared data from Trulia’s Market Mismatch Study which showed that in today’s premium home market, buyers are in control. The inventory of homes for sale in the luxury market far exceeds those searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer, or can be found at a discount. Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call your house their new home. The sale of your starter or trade-up house will aid in coming up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000. But not all who are buying luxury properties have a home to sell first. In a recent Washington post article, Daryl Judy, an associate broker with Washington Fine Properties, gave some insight into what many millennials are choosing to do:
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase. They’ll stay in an apartment until they can afford to pay for the place they want.”
Bottom LineThe best time to sell anything is when demand is high and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs, and are looking to step into a luxury home… Now’s the time to list your house for sale and make your dreams come true.
Self-made millionaire David Bach was quoted in a CNBC article explaining that "the single biggest mistake millennials are making" is not purchasing a home because buying real estate is "an escalator to wealth.” Bach went on to explain:
"If millennials don't buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter."In his bestselling book, “The Automatic Millionaire,” Bach does the math:
"As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!"