How Millennials Can Own Homes
By Phoebe Chongchua
They’re an ambitious group known for being tech-savvy and dialed into the gadgets and devices that can help them professionally and socially, but are they able to achieve the American Dream–home ownership?
According to the U.S. Census Bureau, only 36 percent (the lowest level since 1982) of Americans under the age of 35 own a home. That figure has declined from 42 percent in 2007.
A Fannie Mae survey reports that the majority of millennials do want to own rather than rent a home. The problem is they’re saddled with tremendous debt, in large part from student loans, resulting in inability to come up with a downpayment. Tighter lending standards and rising home prices also make the dream seem impossible to achieve.
But there may be some hope. A Fannie Mae spokesperson indicated that there are some signs that lending is getting “a little less tight”. Lenders are also starting to approve those with lower credit scores and those who have less than a 20 percent downpayment.
That’s good news for this group of nearly 80 million. However, where are the homes they will be able to afford?
The construction of new homes, although improved, is still off. Builders struggle with a shortage of land to build on, skilled workers, and increasing cost of building materials. Employment opportunities are still weak and wages have suffered, forcing many millennials to live at their parents’ home even after college. This all amounts to economic uncertainty and buying hesitancy for millennials.
For those millennials who want to get into the real estate market, a sharp focus on their financial future is critical.
Age is playing a factor. As this generation hits the 30s, they’re even more excited about homeownership. It’s predicted that Millennial households will increase, making up 24 million of the new households between 2015 and 2025.
Millennials are finding that even if they have a good job, cutting back on spending is key. Spending less and saving more – budgeting – proves to be an effective formula for coming up with a downpayment.
They’re also consulting certified financial planners. Some very savvy millennials have even set up online businesses offering resources and fee-only affordable planning for their own generation.
With a knack for technology on their side, millennials are armed with lots of information to help them figure out the best financial choices. There are apps to help them track their spending, save more, create goals, measure progress, and more.
For the overall health of the housing market, it’s important for millennials to make smart choices. When this group purchases homes, it starts the “trade up” cycle for current homeowners. According to the National Association Of Realtors, it will take about two years for the homeownership rate of millennials to rise.