certain markets are anticipated to attract millennials not just for their location but also for their home prices
Chicago, IL (PRWEB) February 06, 2015
While news outlets repeatedly paint millennials as dwellers of their parents' basements, The Federal Savings Bank is pleased to read that the media is singing a different tune as more younger buyers aspire to trade up their current living situations and become homeowners.
Homeownership rates among millennials are projected to grow as housing becomes more affordable with lower mortgage rates and expanded credit availability, as the Los Angeles Times reported on February 1st. Although there has been a shortage of millennials in the housing market compared to other age groups, The Federal Savings Bank senses a significant shift will occur this year.
Millennials under the age of 35 are poised to surpass Generation Xers as the biggest home buying group by the end of 2015, according to Stan Humphries, chief economist at Zillow on December 2nd, 2014. He said almost 42 percent of millennials want to purchase a home within one to five years - a higher percentage compared to Generation Xers.
While there have been reports that millennials are not driven to buy homes like their parents, the head economist for Zillow doesn't believe that this younger group has lost interest.
"The lack of home buying activity from millennials thus far is decidedly not because this generation isn't interested in homeownership, but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home," Humphries said in a statement. "As this generation matures, they will become a home buying force to be reckoned with."
Why millennial homeownership rates were down
Millennials are bouncing back after homeownerships declined. The homeownership rate for millennials dropped to 36 percent in the first quarter of 2014, according to the National Association of Realtors reported on July 24th, 2014. The millennial homeownership rate has not hit its peak since 43 percent in 2005. However, this could change a decade later as millennials move into more affordable home buying markets.
NAR Chief Economist Lawrence Yun said millennial buyers are often weighed down financially by student debt and slow wage growth, which prevents them from being able to buy in high-priced markets like New York and San Francisco. Despite this, there are other markets where housing is more affordable for the millennial buyer.
"However, NAR research finds that there are other metro areas millennials are moving to where job growth is strong and homeownership is more attainable," the NAR report said. "These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves."
Where millennials will demand homes
One sign of more millennials and other first-time home buyers coming into the market is the rise of prospective homeowners coming to home tours. Real estate brokerage Redfin said first-time buyers recently represented 57 percent of home tours, according to the Times.
With more millennials entering the market and 2015 housing sales expected to grow from the previous year, certain markets are anticipated to attract millennials not just for their location but also for their home prices. NAR highlighted cities like Austin, Texas; Denver; Minneapolis and others where millennial home buying activity is projected to increase.
The Federal Savings Bank has been expecting a large participation from young first-time home buyers for quite sometime. With unemployment at post recession lows, savings are rising for a down payment, and credit scores are rising. It's only a matter of time before millennial home applications surge.
Millennials or other first-time home buyers could contact the Federal Savings Bank, a veteran owned bank, to learn more about buying a home and applying for a mortgage.