Millennials Are Taking Over the U.S. Housing Market. Here’s How.
Remember all the jokes about Millennials being the first generation to stay with their parents after college? Well, things have changed somewhat over the last few years – Millennial are now big players in the U.S. housing market.
Surprised? Don’t be. For Millennials, buying their own home is very much a part of living the American Dream, which most of them believe in, despite all the politics and the negativity in the country, largely spread by the media.
2017 was a great year for the U.S. economy, the stock markets were booming, the unemployment rates were at a record low and home prices were on the rise. This is as good time as any to buy a home in the U.S., and Millennials are buying! Here are the facts.
#1: Millennials are responsible for buying a majority of the homes in the lower priced category and taking out a higher share of the new mortgages than Gen Xers and Baby Boomers, according to a study by Realtor.com. But they are also taking on a lot of debt in the process.
#2: Millennials are the most educated generation we’ve had in the U.S., and that also means they are burdened with a huge amount of student debt. They are starting families too, and for this reason many first-time Millennial homebuyers take on a lot of debt to finance the purchase.
#3: The median purchase price of the homes bought by Millennials was $237,000 in 2017, which is lower than that of Baby Boomers ($258,000) and Gen Xers ($280,000). The gap is getting narrower as more and more Millennials enter the housing market.
#4: Another interesting aspect of this is that Millennials are earning more today than ever before. The debt-to-income ratio of an average Millennial mortgage applicant in 2015 was 37%. In 2017, it was 38%, which goes to show that Millennials are taking on more debt, but they are also earning more. That’s good news.
#5: Millennials would rather buy a new house than an old one as they really don’t like spending time and money on the maintenance or renovations. Only 11% of Millennials expected their first home to be permanent. Most see their first-home home as nothing more than a stepping stone in their journey as homeowners and expect to upgrade to bigger and better homes eventually.
#6: An average homeowner in the United States holds on to a home for 10 years. Millennials are less patient – they change homes in six years or less.
#7: Millennials are moving back to the suburbs. Over 50% of Millennial homebuyers have homes in the suburbs. Only 25% stay in urban areas. In this, Millennials homebuyers are no different from the Baby Boomers and the Gen Xers.
What makes Millennials different from the earlier generation is that they have far greater buying power. The reason for that is that Millennials get a lot of financial help from their parents when buying a house. The parents – Baby Boomers – are a very wealthy generation and are keen to help the kids out. Things parents would do to get you out of the house!