How Millennials are Changing the Real Estate Market
If you are a millennial or know a millennial, then chances are, buying a home has come up at least once in conversation. That’s because millennials -those currently aged between 20 and 36- are now the generation looking to buy their first home. But like researching the best burger joints in town, millennials are using their research driven skills to make sure their first home is nothing short of perfect. Their attention to detail mixed with poor planning and bad credit make for an interesting housing market, nonetheless.
To help better understand Gen Y’s housing habits, below are 3 ways millennials are impacting the real estate market at this very moment.
1. Suburbs are still cool!
It might come as a shock that many millennials are still heading to the suburbs (versus the city) to buy their first home. It’s because for millennials, convenience (being close to their jobs) and a trendy lifestyle, trump flashing lights and long nights out on the town. As more and more suburban neighborhoods bring in cute cafes, high-cost spinning studios and boujee breweries, millennials are choosing the suburban life — just with a Gen Y flair (i.e. extra guacamole on the side).
2. Millennials are credit challenged.
According to a report by TransUnion, Millennials are the generation with the lowest credit score (625), compared to Generation X (650) and baby boomers leading the way (709). This means 43% of millennials don’t have good enough credit to land a mortgage and get approved for a home loan.
Before millennials move back in with their parents, however, there is some good news. The world’s leading provider of credit ratings, S&P Global Ratings, recently predicted that in 2018 non-qualified mortgage (QM) loans will double and triple. This means that credit-challenged millennials will have access to loans that don’t need agency requirements.
3. Renting > Buying
Renting continues to be the preferred method of living for Gen Y and this is for a multitude of reasons.
One main reason — millennials like the nomad life- they are more comfortable picking up and moving to the next trendy city and don’t want a mortgage holding them down while they do so.
A millennial’s choice to rent over buy can also be attributed to overall cost of owning a home. Leading the way as the generation with the most college debt, millennials do not have the down payment to put on a home and would rather put their money in the pockets of the landlord.
Whether this costs them more money over time or not, many millennials are still not ready to invest in a home.