Millennials Move Toward Home Ownership
February 4, 2015
Young couples and singles in their late 20s and early 30s are making a belated entry into the home-buying market, confirms several recent housing reports. Rising rents are prompting more millennials to move toward home ownership, along with an extra push from mortgage rates being in the mid-3 percent range, the government’s recent efforts to ease credit requirements for a loan, and moderating home prices that are helping to improve housing affordability.
Opening the Credit Door
A recent monthly poll of more than 2,000 real estate professionals nationwide showed higher reports of first-time buyer activity much earlier than is typical, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The survey showed that first-time homebuyers accounted for about 36 percent of overall home purchases in December.
The real estate brokerage Redfin said that surveys of its agents have recently shown first-time buyers accounting for 57 percent of its home tours – its highest rate recorded in recent years. What’s more, home-purchase education class requests – which typically come from first-time buyers – surged 27 percent in January year-over-year.
The National Association of REALTORS® reported that first-time buyers comprised 29 percent of existing-home sales in December, up from 27 percent a year ago.
NAR President Chris Polychron says the Federal Housing Administration’s plan to reduce annual mortgage insurance premiums likely will have a positive impact on springing first-time buyers into action. FHA, which offers loans with down payments as low as 3.5 percent, decreased its insurance premiums on Jan. 26 from 1.35 percent to 0.85 percent.
“REALTORS® support responsible lending to qualified borrowers and the move to lower premiums will enable more buyers to enter the market while continuing to protect taxpayers from the risky lending practices that led to the housing crash,” Polychron said in a statement.
Jonathan Smoke, chief economist realtor.com®, has called 2015 the “year of the millennial” in real estate.
“Millennials are at a critical demographic tipping point where their sheer numbers will naturally drive demand for more home sales,” he notes in recent housing commentary at realtor.com®.
He says that home sellers should be encouraged, particularly those who own affordable homes and are looking for a long-overdue upgrade. With the move by many lenders recently to permit smaller down payments on home purchases, more millennials will likely make a move and that means home sellers “who’ve been sitting on equity in entry-level homes can finally upgrade to bigger homes and retirement homes.”
Source: “Millennials Are Finally Entering Home-Buying Market,” Los Angeles Times (Feb. 1, 2015); “Existing-Home Sales Rebound in December,” National Assocation of REALTORS® (Jan. 23, 2015); “2015: Buy Now, Before Fed’s Patience Ends,” realtor.com® (Jan. 30, 2015)
Updated: April 07, 2020