Although many young renters expect to buy homes, their timelines have been delayed somewhat. Of renters who expect to buy a home, young adults remain a minority of expected buyers over the next year. ~ Zillow
Minneapolis, Twin Cities Minnesota (PRWEB) February 02, 2015
Real Estate experts watch to see if higher percentages of prospective Millennial age home buyers will continue renting or become home buyers. The dreaded impact on housing if Millennials do not queue up to buy homes in 2015, according to EliteDaily and Millennial Branding. When well over half of Millennials (59%) indicate that their preference is to remain renters over buying a home, it grabs the attention of home sellers in the Twin Cities. While only one in four prospective homebuyers in this generation are indicating they are either very or completely likely to purchase a home in the next five years, levels in the Twin Cities are higher.
"Bettering national averages for home affordability, great home affordability in the Twin Cities is helping more Millennial home buyers purchase a home. While real estate markets across the U.S. ponder the urge Millennials may have to buy a home, the Minneapolis metro is already favored among those who do," finds Jenna Thuening, owner of Home Destination.
The surprising factor discovered by Zillow in a similar study is that Millennials' view on homeownership appears to be more conventional than senior home buyers. Regardless of indication that societal views on homeownership are adjusting in the wake of the Financial Crisis, younger home buyers still regard homeownership as a signal of status and stability.
“Nearly two-thirds of young adults said they think that owning a home is necessary to live ‘The Good Life’ and the ‘American Dream’”, according to Zillow.
Some of the buzz in real estate last year was a question asking what happened to many of the first-time home buyers. The drop in first-time home buyer activity has created a huge gap. Housing experts at Zillow took a close look at just why a hefty percent of Millennials decided that they’d rather rent for a while. A robust housing market is dependent on first-time homebuyers being active and buying starter homes. If there is a general trend among Millennials to hold off longer, a domino effect may be triggered. Move-up home buyers are dependent on finding a buyer for their current home. New household formation often takes place when Millennials living in their parents' homes decide to venture out on their own. If high numbers decide to buddy up together and rent a home, the ripple effect is carrying a long way.
Zillow ‘s recent research into real estate purchasing patterns found that higher numbers of young people are “doubling up” and sharing living arrangements. The Millennial generation is maturing and showing that they have adopted their own take on settling into one home long enough for home ownership pay off. Relocating for a job and diverse city life is behind the decision of many Millennials who make the Twin Cities home.
While some research indicates that homeownership is still considered the best financial investment by a majority of Millennials, things have changed up significantly. After asking a pool of Millennials what their living preferences are, it is clearer that some don’t feel the same compulsion that perhaps their parents had.
Some Millennials indicate they rent now but plan to buy a home in the future. But waiting to buy a home has potentially costs, too. With the likely chance that interest rates and median home prices will rise further this year, if current rates of home appreciation continue, in 10 years a home priced at $190,000 today will carry a listing price of approximately $249,000. If interest rates revert to previous norms of 5.6%, a total monthly house payment of a $249,000 home shall become $1,574 a month. If it is tough to afford this monthly cost now, the 52% jump over the $1,037 house payment for a median priced Twin Cities home today; add interest spread over 30 years, and the buyer will be out of pocket a total of $566,640 (if 10% was put down) for a home worth $558,356 by the time it is paid in full.
“In this scenario you wouldn’t come out positive on your investment in the property until a year after the mortgage was paid off, in 2056 — at which point the home would have a projected value of $573,608,” according to a statement quoted in Market Watch on January 30.
Basics of What Millennial Homebuyers Want:
- Affordability is clearly a concern for younger home buyers who are purchasing their first-home.
- They prefer metro areas where jobs are plentiful, but housing is expensive.
- They want diverse city life and culture.
When the numbers are crunched, prospective Millennial home buyers who have previously opted for more flexibility when renting, may decide that settling down at one address and gaining the benefits of accruing home equity are worth it.
Rising rents in the Twin Cities may give some Millennial renters pause. A quick work calculating the cost of renting versus buying, if paying $1,312 a month in rent (the average market rent price for a three-bedroom home nationwide) and the cost to rent goes up at a rate of 2.7% a year (the average increase over the past decade), that means out of paying $717,000 in rent over a 30-year time span. More staggering of a thought is that after doing so, the renter has no tangible goods in the end. Unless the individual shares that financial burden with roommates, the same amount could be gaining equity in a home.
NOTE: the following statement from David Arabov, CEO Co-founder Elite Daily: “Our findings confirmed that millennials are highly educated, career-driven, politically progressive and–despite popular belief–do indeed develop strong brand loyalty when presented with quality products and actively engaged by brands".
About Home Destination - Twin Cities Real Estate:
Home Destination offers a loyal and committed real estate professional service that personally handles all of the details of selling or purchasing homes in Eden Prairie, Minnesota. Helping all home buyer types, from individuals seeking to buy their first home to individuals purchasing investment properties, Jenna Thuening has the real estate experience and acumen buyers and sellers benefit from. Read the full report on why Millennials are moving to Minneapolis-St. Paul MN.