DISPELLING THE MYTH ABOUT MILLENNIALS AND HOMEOWNERSHIP

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mythaboutmillenialsandhomeownership-240x170“The American Dream of homeownership is as strong today as ever.” That’s the belief of HUD Secretary Julián Castro, who in a May 10 address at the National Association of Realtors’ Regulatory Issues Forum said millennials are just as committed to homeownership as their parents and grandparents.

Despite a widespread impression that members of the younger generation are not interested in owning a home, Castro noted a recent survey by TD Bank that found 40 percent of millennials are planning on buying their first homes during the next year.

Student loan debt has been the main obstacle to millennials buying a home, Castro said. About 40 million Americans have some amount of student loan debt and about 70 percent of students graduate with student loan debt, with the average amount of debt at graduation spiking by 56 percent from 2004-2014. The increase has been so great that it has caused many parents and grandparents of millennials to shoulder that debt, with 20 percent of millennials now providing some type of financial assistance to their parents and grandparents.

But things are beginning to improve, Castro said. The number of student-loan delinquencies is declining, and economic improvements have resulted in the creation of 14.5 million jobs during the past 74 months. The average hourly wage also has risen 14 cents in March and April, and the current unemployment rate of 5 percent is the lowest it has been post-recession.

The housing market is a part of the nation’s overall economic strength, he added. “Real residential investment has grown by more than 8 percent for six straight quarters, highlighting the housing sector’s solid, steady recovery,” Castro said. “In fact, growth in residential investment has substantially outpaced growth in overall GDP.”

Castro noted that 1.3 million families have taken advantage of the FHA’s lower mortgage insurance premiums since the association sliced its premium by 50 basis points in January 2015. The immediate result of the mortgage insurance premium cut was a 27-percent increase in the number of home loans endorsed by the FHA from 2014-2015 (up to 753,000), with many of these loans being secured by first-time homebuyers.

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YOUR NEW NEIGHBOR IN THE ‘BURBS? A MILLENNIAL. YES, REALLY

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surbs-millenials-240x170If you are a member of the millennial group, you are maturing and are moving to the suburbs to escape the high rents and to take advantage of better school districts for your children. According to a national poll, only 17 percent of people in this group purchased a home within a major city last year.

Millennials’ ages average 30 years old. This is the normal time to begin a family. Even if an urban setting is desired, it is not a great place to find affordable space.

Currently, rents are rising at a steady rate. Home prices have been increasing as well. As interest rates remain low, housing supply is extremely limited, especially in urban areas. Also, home builders are not heavily interested in city neighborhoods. First time buyers are looking for smaller homes that are more affordable, which means it is difficult for builders to make a profit.

Debt is a factor for many buyers as well. Many potential buyers do not have the savings necessary to make a down payment. Student loan debts are very prevalent among this segment of individuals. Back a few years ago, credit card debt was the major issue facing home buyers. Wages must grow so that the market becomes easier to tackle. Despite job creation, income must be increased.

Almost half of millennials have a desire to purchase a home. If this segment decides city life is the way to go, realtors are trying to woo individuals into the condo or “tiny home” movement. To make homes affordable, they must be smaller in space.

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