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