Homeownership for Millennials: Overcoming Market Challenges
Millennials are defined as those following Generation X and preceding Generation Z born between 1981 and 1996. They face unique obstacles when it comes to home purchasing, including housing market conditions, staggering student loan debt, and the lingering financial effects of the COVID-19 pandemic. However, the world’s biggest generation is finding a way to overcome these challenges.
The Challenges
The COVID-19 pandemic greatly affected the world; however, for millennials, it impacted them during their prime wealth and career-building years. This caused a decline in the number of people who could afford a down payment and other necessary funds required to purchase a home.
Towards the end of the COVID-19 pandemic, housing market conditions began to change rapidly. Interest rates were low and buyer competition was higher than ever before. The market then shifted to be heavily buyer-concentrated, raising housing prices and interest rates significantly. As a group, millennials tend to gravitate toward larger cities when choosing a place to make their home. However, homes in these locations with historically higher costs of living became much less affordable.
A large percentage of millennials also face an issue that is not as prevalent in previous generations—student loan debt. The rising cost of living and the emerging need for a formal education stemmed a surge in student loans. The average college graduate is estimated to have over $20,000 in debt, with some graduates possessing more than $100,000 in debt.
The Outcomes
To combat the savings decline, financial institutions are offering mortgage loans with lower down payment and payment plan options. These options work to reduce the initial financial strain when purchasing a home. Check with your lender to learn more about which mortgage loan types are available to you.
In many cases, home buyers are shifting their search to less desirable neighborhoods or ones undergoing urban revitalization. These areas are typically “up and coming” or outlying the city center, giving buyers more affordable options. Homeowners may experience less convenience for a while, including construction or lengthier commutes, but ultimately, their investment should pay off as these neighborhoods grow.
Home sharing is another way for people to afford homes. By purchasing a home with family or close friends, buyers can split the costs of a purchase, making both initial costs and the monthly mortgage payment more manageable. Though it may not be an ideal situation, it works for some and can help people accomplish their real estate goals faster.
Not looking at co-ownership as an option? Another way to make home buying more affordable is to search for smaller homes. A small difference in square footage could have a significant price difference. Many millennial home buyers have begun looking at spaces like tiny homes, condos, and townhomes. These spaces still give buyers the perks of home ownership they desire without the higher costs.
Start Your Home Buying Journey
Are you looking to become a homeowner? Reach out to our mortgage experts at Coastal Custom Mortgage to see how we can help you reach your real estate goals! With several home loan programs, our team can find the one that works best for you.