In the past few years there has been some speculation and more concrete talk as to why Millennials are not buying homes at the same rate as their predecessors have. Not to mention that Millennials tend to look for homes in or around cities, which often are higher in price than homes further out in the suburbs. Factors such as student loans, credit card debt and marrying later all affect this generation’s somewhat slow entry into the real estate market and more specifically, home buying.
As of Q1 this year Millennials have upped their game and have quickly become the largest group of homebuyers, accounting for nearly 45% of purchase loans in January alone. This directly led to fiercer competition in the lower end market.
While Millennials have become the predominant group to search for homes on “realtor.com,” a recent article from CNN Money indicates that there is some other competition in the market. “Millennials are mostly first-time buyers and they are competing against repeat buyers who have more buying leverage and experience,” said Javier Vivas, manager of economic research for Realtor.com.
Studies also show that Millennial borrowers are able to secure mortgages with a lower credit score, with their average FICO score hovering around 722 in Q1. On the other hand, Millennials are also encountering a stricter environment compared to 10 or 20 years ago.
Even with all this positivity for Millennials entering the real estate market, increasing home and rent prices can be quite daunting. Millennial homebuyers can still only afford a percentage of homes on the market today, with their budget generally being much lower than other age demographics competing in this market. This is why experts can all agree that determining your budget along with getting pre-approved for a plan are first two fundamental steps in the home buying process.