Millennials House Buying Habits
Even with the fears of foreclosure in this terrible market, the young are now trying to break in and buy some real estate!
It’s a tension between what a young person today wants in a home, and what they can afford. Millennials want a walkable, city lifestyle. The current real estate market is priced too high for most people in their twenties in the locations they are interested in.
Millennials also should expect to spend a lot of time looking for a home, as tight supplies and high prices make it tough to gain a foothold in the Greater Boston real estate market. While Boston neighborhoods such as South End and the Seaport offer trendy restaurants and quick commutes to work, the prices are probably out of reach for many. The median price of a condominium in the South End, for example, was $765,000 in the second quarter of this year.
Even condos can be unaffordable, since condo fees are often hundreds of dollars a month on top of the mortgage payment. More than that, if someone has to move and wants to rent out their condo, the bylaws of the condo association can set limits on that, too. Some condo bylaws only permit a certain percentage of owners to rent out their condos. Other condo bylaws require prior approval of the condo board before renting is allowed.
Lesson: read the bylaws of a condo association carefully before buying one.
Millennial Impact on Housing Market
The business model for the real estate industry has been the same for many years: young families buy “starter homes” and as their families grow in size, the first home gets traded for a larger one. Right now, the home ownership rate is 63.7%, which is low.
That business model is in jepardy. Millennials are not buying those “starter homes” for a lot of reasons, including huge student loan bills. The real estate industry hopes that the low level of home buying by young people is not the future of housing demand, but that is wishful thinking.
When we put the low home ownership levels with signs of the real estate market overheating, there is good reason to think there will be another rapid drop in home prices in the next few years.
The typical Philadelphia millennial can afford a $45,700 home, which isn’t great, considering that a relatively low median net worth in Philadelphia makes it hard for the city’s millennials to pay for a home, the report said.
Millennial Compromises to get Mortgages
Lauren Bowling, 28, is the blogger behind personal finance website L Bee and the Money Tree. Bowling decided to switch from being a renter to owner at age 26. An Atlanta resident, she opted to take advantage of a first-time homeowner program. The city of Atlanta offered her a payment assistance loan, which would be forgiven after Bowling occupied the home for a predetermined period of time.
However, there were stipulations on the home Bowling could buy.
“Because I wanted to get the down payment assistance, I had to buy a foreclosure, but I picked an older, foreclosed home that needed new plumbing, electric, the works,” Bowling says.
And there’s an idea…move the young into already foreclosed houses.
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