I still get the terms confused all the time…young adults are labeled as “Millennial’s”, “Generation Y”, “Boomerang kids” – all to describe Americans currently aged 18-35. Life was much easier for me as I grew up in the “Generation X” era. We only had one label similar to baby boomers. I still don’t know why this group has so many different labels?
What I do know is that first time home buying is at an “all time” low and the folks that make up this group are smack dab in the middle of it. The refinance transactions that have been fueling the mortgage market over the last three years have evaporated. A 1% jump in interest rates since May has turned the spigot completely off. Purchase transactions are expected to fill the void as we head into 2014.
The housing market and the economy need this group to engage. How is that going to happen? What is really holding you back from diving in head first into real estate?
Plagued with Consumer Debt:
- Student Loans: The student loan debt in this country is well over 1 trillion dollars, at its highest point ever, and shows no signs of easing. The facts are that college costs significantly more money now than it was for my group, the Gen X’ers. Find more information here about how student loans (even if they are deferred) affect your mortgage qualifications for buying a new home.
- Car payments: It’s the new norm to have a car payment. $300, $400, $500 a month is on almost every credit report we look at. What happened to buying a used “Junker”? It’s just not cool apparently!
- Smart phones: Gen X’ers didn’t even need a pager and had no WIFI to pay for to survive. It is now a necessity to have the latest top of the line phone.
- Credit cards: Instant gratification is the name of the game. Ever found yourself buying what you want now and worrying about it later?
Unsure about Homeownership:
- “I have no money for Down Payments”: Financial discipline is typically a learned behavior. Monkey See, Monkey do. Millennial’s have seen their parents go through this latest recession and live paycheck to paycheck. So learning how to save money for the future might still seem like a pipedream when you have to fix problems now.
- “I can’t qualify for a Mortgage”: Most believe mortgage qualifying is too difficult after watching their folks try to refinance or buy a new home in the last 7 years. Having a fine comb ran through your finances simply is not very appealing.
- “I’m not a Handyman”: When I was growing up, the old man had to “fix” everything he could or attempt to, before an expert was called for help. The cost all the things that need to be fixed and maintained on a home, whether by you or hiring someone, can seem too high.
- “A Home is not a wise investment”: This makes sense as the media attention given to the housing bust has been unprecedented. Social media, TV, etc. make it almost impossible to have a good feeling about buying a home. If so many of your friends or relatives have gone through hard times with homeownership, why would you want to jump into that boat?
Starting families later:
- 40 is the new 30: I know multiple friends of mine that are having children in their 40’s. Some are having their first child at 40 years old.
- Rent free: Free room and board at your parent’s house is tough to beat if you are trying to pay down debt or save for a down payment. It is often taken for granted. Many are not ready to take on the responsibility so the stay ends up being extended to years instead of months.
- Recession: Watching your parents deal with negative equity in their home and juggle finances to make ends meet is not helping this group rush to start a family.
- Nomad Life Style: Millennial’s are not afraid to move to pick up and move to different areas. Family dynamics have changed and facetime and smart phones make it easier to be away from our loved ones for a longer period of time.
First time homebuyers have accounted for approx. 30-35% of transactions for the last 3-4 years when prior to the housing melt down, they accounted for 40% of home purchases. Perhaps we need more time to illustrate economic stability, increased wages, or significant personal events for the Millennial’s participation rate to increase in the home buying market space as it is needed.
I’m thinking about buying a home – Where do I start?
Chances are many of the items we mentioned above relate to you in one way or another. Those are all things that can get in the way of your ultimate goal of becoming a homeowner. It is difficult to have the conviction to make often the largest financial purchase you’ll ever make.
The best thing you can do for yourself is to start planning the process early. Talk to a local mortgage professional about your goals and they will help you figure out your qualifications as a borrower. They will be able to help you figure out exactly what type of home you can afford. All you need to do is have the conviction that it is what you want to do and start planning and saving early.
Kirk Chivas is a licensed Loan Officer and co-owner of First Commerce Financial, LLC, a mortgage brokerage based in Wixom, Michigan. With over 17 years of experience, Kirk has committed to providing Michigan residents with accurate and honest mortgage advice. If you have any questions about your current or future mortgage needs, please feel free to ask Kirk a question over on his website.
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