Millennials Entering the Housing Market
Nicole Rideout
Millennials, also known
as Generation Y, are an economically integral population across the
globe. Millennials are defined as people born from around 1982
through the early 2000s and are informally known for their student
loan debt and use of selfies. I coincidentally fall smack dab into
the middle of this cohort, therefore I find this topic intriguing
and immensely pertinent amongst my peers.
Although Millennials are making a delayed entry into the housing
market, the potential impact is vital. Historically, on average
first time home buyers in this age range accounted for 38%-40% of
consumers in the housing market. After the recession, buyers in
this category dropped roughly 28
percentage points.Trends are now showing that this number is on
the rise. Recent datareflected
millennial buyers representing 36.3% of buyers in December of 2014.
This is a promising sign especially with the spring market on the
horizon.
Baby Boomers, a cohort which is actually significantly smaller
than Millennials, have had and continue to have a major influence
on the housing market. Millennials make up 25% of the US population
totaling roughly 80 million individuals. This makes the generation
20% larger than that
of the Baby Boomers which most people tend to regard as one of the
largest and most influential groups in recent history.This is a key
indication of the power of the Millennials as a whole.
Millennials have a number of factors that have kept them from
owning property up to this point including student loan debt, and
all of the fears that come along with the recent recession. The
question would be, why now are we seeing positive trends in
home buyers of this generation? Simply put, our recent market
conditions are allowing first time home buyers to enter the market.
Most millennials currently are renting or living at home, both
predicaments eventually get old (no offense, Mom and Dad). Mortgage
rates are down and regulations are becoming more flexible to allow
this generation to start to build equity of their own. Mortgage
rates are currently in the high 3s. Studies show as much
as a 1% increase in mortgage rates decreases affordability by 10%.
The current rates and regulations are indicative of the blatant
attempt to include this crucial cohort in the Housing Market.
All in all, market conditions are creating an opportunistic
environment for millennials that are renting or living at home to
make their first home purchase and start to build their own equity.
Millennials being relocated for work have a great opportunity as
many large employers offer to cover closing costs and other moving
related expenses. The opportunity is here. There are definitely
hurdles but they are by no means insurmountable. It will be
interesting to watch how many millennials make home purchases as
the market picks up through the spring and summer. Overall, there
is no way of predicting the future but we do know that when the
time comes that this generation does start buying homes, it will
play a major role in our economic environment.
Additional source: MSI