According to Zillow, an online real estate APP, millenials contributed $514 billion to the real estate sector the last one year. This figure makes the millenials the largest group among the home buyers in the US. However, the number of millenials who own a house is lower in the current generation compared to previous generations. This shows that less number of millenials is buying a home and this is because of various reasons that make it difficult for them to own a house. Here are some of the reasons why there was a drop in the number of millenials who can own a home in the current generation.
The number of millennials who can buy a house is less than it was for the past generation of millennials because the current millennials can`t afford a home. Houses and even apartments are going high in value and therefore this makes it harder for the generation of millennials to buy a home. Even if their salaries are increasing, the expenses also increase outgrowing the amount earned and therefore it becomes hard for them to save for a house. Therefore, these young people find it hard to buy a home and opt to pay rent making the number of tenants remain high.
They Can’t Qualify for a Home Ownership Loan
Very few millennials are able to raise the 21% deposit, which is required for them to qualify for a homeownership loan. Therefore, they have postponed this ambition based on the fact that their expenses compared to income, can’t enable them to save enough to raise the deposit so as to be able to place a deposit for the home. A home loan is usually a very good boost that encouraged the previous generations to own a home when they were in this age group. However, things have changed since the current age group is unable to plan for their finances and be able to raise a house deposit. This, therefore, means that they have to work more years, which pushes the dream of owning a home to later years which is beyond 35 years old.
Rising Value of Homes
Since 2016, the prices of homes have gone up and not come down such that it would be convenient for the millennials to own a home. The prices are increasing by 5.6 percent year over year and this is a very big margin to enable millennials to buy a home. Therefore, we should expect the median age to own a home to rise to 40 or probably beyond. This means the millennials have to work harder to raise the amount required for home ownership.
Instability in Mortgage Rates
The rate of a 30-year mortgage increased to more than half percent and therefore the people taking new mortgages will pay more. This means more expenses to the millennials. Currently, the prices of basic items are also unstable and affording more money to service a mortgage is becoming impossible.
Therefore, based on above factors, millennials may be seen to have postponed their ambitions of buying a home to a later date. This is when they can afford since they will have saved more.