First-time homebuyers make up about 40 percent of the current market; in 2010 this number was as high as 50 percent.
On average, the median age for a first-time homebuyer in the U.S. has ranged between 30 and 32 over the last 30 years, according to statistics from the National Realty Association. As more millennials (those between the ages of 18 and 34) are reaching this age, housing experts have noted that many of them are postponing their entrance into the housing market.
Millennials are choosing to rent, or live at home with their parents longer than the generation before them. The slow pace of economic recovery along with tightened credit and the staggering amount of outstanding student debt – approaching $1 trillion – is packing a punch on the millennial generation.
With tightened credit, many defaulting young borrowers are no longer able to qualify for loans, especially mortgages. In 2005, nearly nine percent of 25- to 30-year-olds with student debt were granted a mortgage. But last year, that percentage dropped to slightly above four percent, according to a FRBNY report.
According to a recent real estate study by Truilia, more than 50 percent of millennials are asking their parents and/or grandparents for help with meeting guidelines for a mortgage loan. Approximately 37 percent said they would get a second job to afford a home and 22 percent would consider a government-sponsored program.
Historically, government programs like loans back by the Federal Housing Administration (FHA) have been popular with homebuyers who did not have the typical 20 percent down payment. However, news of rising fees has made some young borrowers leery about going this route. Many factors could be at play for this recent trend: result of a shortage of homes for sale inventory, home prices rising, slower levels of overall real estate value appreciation (thus not supporting the higher prices), rising interest rates, high levels of student loan debt, and (perhaps the biggest factor) historically lower overall employment for 25-34 year olds.
When the millennials are ready to purchase a home, many are surpassing the typical “starter home” and are settling on homes that are priced above average than what the average first-time buyers before them were purchasing.
The typical first-time homebuyers today aren’t what they were 40 years ago. They are no longer newly married couples moving out to the suburbs to raise a family. Today, single women make up a large percentage of first-time buyers, as do gay couples and the always-connected mobile professional. The new generation of first-time homeowners is incredibly tech savvy and often they want their home to reflect this.
Millennials want smart homes instead of luxury homes. New generation home buyers would like their homes equipped with the technological capabilities they have grown accustomed to. Some even go so far as to install home automation systems. With one tap on a touch screen, the owner of that home could remotely lock/unlock doors to let in their kids from school, automatically turn on the A/C or heat before they leave work, or monitor the family dog via webcam smaller. They are choosing function over curb appeal.
Today’s first time homebuyers are also choosing to go green inside their homes. Studies show millennials are willing to spend a little more money on eco-friendly appliances and high-energy efficient heating and cooling systems than previous first-time buyers. They want a home with a smaller carbon footprint and they are willing to take the necessary steps to be able to achieve this.
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