Older millennials are driving the housing market right now, but first-time buyers are having a hard time coping with the bidding wars, rising mortgage rates, and inflation. Experts say that it is not going to get easier for young first-time homebuyers, as the inventory does not go in their favor.
The reality of a tight market such as the one that can be seen right now is that first-time homebuyers are getting priced out of a home. Research shows that more than 82% of all America’s younger millennials have bought their first home in 2019 or 2020. But the number of homes bought by millennials fell by 1% in 2021 and it appears the trend will continue.
This homebuying generation is without a doubt quite different than those of their parents and grandparents. From massive student loans, living through a housing market crisis and a pandemic, as well as a generational lifestyle change, there is a different approach to home buying with people under 40.
Young adults less frequently use traditional means of house hunting, instead, they opt for digital technology, virtual tours, and online walk-troughs. They also created a trend of buying a house without ever seeing it in person, in order to overcome the pandemic-driven restrictions. Studies show that real estate businesses have been adjusting to millennials’ needs.
Experts explain that millennials are in a rush to buy a home because they have been waiting so long for the right moment. They had to overcome the consequences of the Great Recession and pay off their student loans. They lived to see mortgage rates go down to an unseen low, right about when they got into their thirties and started creating families.
What makes these circumstances even more special is the historically low supply, that created a deficit of one billion homes. Young adults that want to buy a home have to compete for the price they usually can’t achieve. Right now, with mortgage rates and inflation rising, as well as supply staying low, millennials are having trouble staying on top of a house search without having to raise their agreed maximum.
After years of saving up for the down payment, millennials now have a steady income and many young adults work from home, so they are in search of a spacious property. This search is often interrupted by cash and non-primary residence buyers. Being excluded from owning real estate, millennials have to settle for renting, which stops them from creating family wealth.
Millennials are known as a generation that loves its freedom, they get married less and later in life, they like to switch jobs more frequently and they prefer living in urban areas. So, renting was very popular in this generation before the pandemic, but as the rent grew significantly there has been immense pressure to own a property. Right now, renting is not cost-effective because residents have to pay the rent as much as a potential mortgage payment.
Millennials’ demand will not fade in years to come, in fact, it is expected to grow as more young adults reach their homeowning years. The same generation that is pushing the market into higher prices is the one that cannot afford them.
Higher mortgage rates may dampen the demand for a short period of time, but the only thing that can be a lifeline for young first-time buyers is creating supply. The only thing that can bring affordability is putting more houses on the market.
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