How Exactly Are Millennials Buying Homes?
Unlocking the Mystery of Millennial Homeownership: How Are They Doing It?
Are millennials buying homes? You might be surprised to learn that, yes, they are! Despite the belief that millennials are all renting and prefer it that way, many young adults opt to buy homes instead. But how are they doing it?
Let us take a look at how millennials are now buying homes instead of renting. We will also get up close on the factors influencing their decisions.
The overall percentage of millennials who own their homes is increasing. Based on the latest data from the US Census Bureau, 36.5% of adults aged 25-34 owned homes. It is the highest homeownership rate for this age group since 2007 (before the financial crisis). The rise in the rate of homeowners in this age group is due to an increase in income.
But millennials today also feel positive, especially at the start of 2021, when many feel that they are more financially stable than they were just a year ago. Around 43% of millennials say they are in a better financial position now than they were in 2019, according to a new study from Bankrate.com. And this increased financial stability is translating into increased demand for homeownership.
How do millennials manage to possess ownership of homes?
So, how are millennials buying homes? There are a few key ways:
1. They are saving for a down payment
One of the biggest obstacles to homeownership is coming up with the money for a down payment. However, millennials are increasingly prioritising saving for a down payment on a home. Around 29% of millennials say that saving for a down payment is their top financial priority, according to Bankrate.com.
2. They are getting help from family and friends
Another way that millennials manage to buy homes is by getting help from family and friends. Around 21% of millennial homebuyers say they received a financial gift or loan from family or friends to help with the down payment.
3. They split the payment with friends
Some millennials also opt to commune in a house with friends. It is popular among millennials who do not have plans to get married yet. It will be easier to pay the cost of the house if two or more friends are paying for it.
4. They are using creative financing methods
In addition to traditional methods like savings and loans, millennials also use more creative financing methods to buy homes. For example, some millennials use "house hacking" to buy their first home. House hacking is when you purchase a property to rent out part of it to help offset the cost of ownership. It can be a helpful strategy for millennials who want to buy inexpensive real estate markets.
5. They are buying in cheaper markets
Another way that millennials can afford homeownership is by buying in cheaper markets. Not only are there generally more affordable homes available in these markets, but the cost of living is also typically lower, which can help stretch your budget further.
6. They avoid rent
Saving up money for a down payment can be troublesome, especially when you also have to pay rent. Hence, many people aged 18-29 still live with their parents.
What is driving millennials to buy homes?
There are a few key factors that are influencing millennials' decisions to buy homes:
1. They want more space
One of the biggest reasons millennials buy homes is because they want more space. Many millennial homebuyers say they purchased their home because they wanted more living space. This is especially true for millennials who have young children or will start a family soon.
2. They want to stop renting
As per the National Association of Realtors, 31% of millennial homebuyers say they purchased their home because they were tired of throwing money away on rent.
3. They want to invest in real estate
For many millennials, buying a home is seen as a good investment. As per the National Association of Realtors, 26% of millennial homebuyers say they purchased their home because they wanted to invest in real estate.
4. They want to live in a specific location
Location is also another factor that pushes many millennials to buy homes. Millennials buy a home because it is in an area that they want to live in.
What are the challenges that millennials face when buying a home?
While there are many reasons why millennials are buying homes, there are also some challenges when doing so.
1. Saving for a down payment
One of the biggest challenges that millennials face when buying a home is coming up with the money for a down payment. Around 29% of millennials say that saving for a down payment is their top financial priority, according to Bankrate.com.
2. The cost of housing
Another challenge that millennials face when buying a home is the cost of housing. In many markets, especially the expensive ones, housing costs have been rising faster than incomes, making it difficult for millennials to afford a home.
3. Student loan debt
Student loan debt is also a primary challenge for millennials when it comes to buying a home. Many millennials say that their student loan debt is hindering them from saving enough to buy a home.
4. Job security
Job security is another challenge that millennials face when buying a home. In today's job market, many millennials are working in jobs that are less stable compared to the previous generations. It can make it challenging to get a mortgage or qualify for a decent interest rate.
5. Credit scores
Credit scores are also a challenge for millennials when buying a home. You need a good credit score to get a decent interest rate on your mortgage. However, many millennials have low credit scores due to factors like student loan debt or limited credit history.
Despite these challenges, many millennials are still finding ways to buy homes. For some, this may mean waiting longer to buy their first home.
Conclusion
Millennials are facing some unique challenges when it comes to buying a home. However, there are also many reasons why they choose to do so. In the end, only time will tell whether or not millennials will be successful in their quest for homeownership.