ON THE MOVE
According to Realtor.com, Millennials are surpassing Generation X as the group responsible for the most new mortgages. This means that Millennials’ share of the mortgage market continues to rise. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers. What’s more is Millennials also overtook Gen X by having the largest share of new loans by dollar volume at 42%!
MILLENNIAL PURCHASE POWER IS HEATING UP
Realtor.com’s Director of Economic Research Javier Vivas said Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market. “The stereotype that Millennials primarily choose to buy homes and live in large metro areas isn’t the reality,” Vivas said. “Results show Millennials’ expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful.”
According to the company, affordability is such a huge factor for Millennial homebuyers that many are moving to housing markets that previous generations considered less desirable.
During 2019, Millennials have moved to affordable areas with strong job markets where they have more buying power. At the end of 2018, the median price of a mortgaged home purchased by Millennials was $238,000, $26,000 LESS than the median price of a home mortgaged by Baby Boomers and $51,000 LESS than Generation X.
Realtor.com notes in addition to increasing their buying power and taking on larger mortgages, data reveals Millennials have consistently made lower down payments than other generation since 2015. In fact, Millennial down payments averaged only 8.8% in December 2018, compared to 11.9% for Generation X and 17.7% for Baby Boomers.
Benefits of HomeOwnership…
Your monthly mortgage payment is a form of “forced savings” building your net worth with each & every payment. It’s estimated that a homeowner making a $998 monthly mortgage payment (P&I) on a $200,000 home can accrue an estimated $3,021 in equity in year one, $3,436 in year two, growing year after year. In just 5 years, a homeowner will have accrued over $25,000 in earned equity & property appreciation!
Currently, the median rental rate sits at $1014 per month, with 100% going to a landlord. You likely handed over a heafty deposit, and when your rental agreement is up, you could see your monthly rental rate increase, too. With a mortgage, your monthly costs are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage, letting you take control of your mothly expenses.
While there are many financial benefits to homeownership, there are notable social benefits as well. Homeowners move far less frequently than renters, bringing stability to neighborhoods & communities. This strengthens social ties among neighbors, who then work together to promote a safe & orderly environment in their area. Better educational outcomes are linked to homeownership. Homeowners have a financial interest in ensuring that their unit is well-maintained and repaired. Landlords charge rents based on the expected level of “use” that will be caused by their tenants, whereas, homeowners have a financial interest in ensuring their property is cared for and well-maintained. Studies also show the decision to stay in school by teenagers is higher for those raised in home-owning parents. Homeowners report higher self-esteem & happiness than renters. They are more likely to believe that they can do things as well, and they report higher self-ratings on their physical health.
Are you ready for homeownership?
Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.
Your dream of owning a home is a greater possibility now than at almost any other time in American history. Before you renew your rental contract, meet with a local REALTOR® and find out if homeownership is possible in your near future. Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.