Contrary to the popular belief that millennials are nomads or that they avoid significant commitments like homeownership, new surveys suggest millennials across the country are trying to take the next step beyond renting and wish to purchase homes. Millennials — ages 18-37 –make up 42 percent of all those who have purchased a home in the last year, according to new research from the 2017 Zillow Group Report. The group, as a whole, injected about $514 billion into the market in that same period.
Many millennials want to buy homes. They realize homeownership is a worthwhile investment, and they’re tired of throwing away money on rental agreements that keep going up in cost. Unfortunately, they’re confronted with a whole set of different problems when they try to enter the housing market.
High Prices in a Hot Housing Market
The housing market today is highly competitive, and home prices are constantly rising — especially in popular urban areas like Seattle, where record-breaking upticks have seen home prices in the county increase at a rate four times as fast as wages.
Prices are so high in areas where millennials most want to live that many struggle to even make a down payment. “Young buyers often start their careers in fast-growing cities in which the market is particularly tough,” said Dr. Svenja Gudell of the Zillow Group in a press release. “And they’re trying to save for a down payment while making record-high rent payments.”
Even prices outside the cities are going up, making living in the next county over and commuting a difficult option as well. The situation doesn’t look like it will get better anytime soon. In downtown Seattle, 25,000 new housing units are planned before the end of the decade, but 94 percent will be rentals, meaning there is still no end in sight to this affordable housing shortage.
Putting Together the Funds
As millennials struggle to raise money to buy a house, they’re often forced to cut corners and make sacrifices to make it happen — otherwise they’d have to give up. They’re pushed into financially irresponsible decisions as well. The Zillow Group Report shows that only 39 percent of the age group actually was able to pay 20 percent or more as the down payment on their home. As many as 21 percent put down as little as 5 percent or less for their home loan.
The housing market is tough for everyone, but millennials have it worse. They are more likely to struggle to find a home and to go over budget. They often include rentals in their housing search, just to have a back-up plan. To succeed in this market, they have to be creative and resourceful. That means financing their down payment through multiple gifts and loans from friends and family, searching far beyond their ideal location, and more. As Dr. Gudell said, “These buyers are willing to try every trick in the book in order to find a place to call home.”
On the bright side, for those young adults committed to becoming homeowners sooner rather than later, getting a mortgage approved isn’t a challenge these days. So far, the real estate market in Seattle is healthy and observers see no sign of a new bubble. As long as the growth and investment continue to flow into Seattle, these millennials might be right in making this jump now instead of later — no matter the risks and sacrifices required.