Millennials are a generic term for the generation we consider born from the early 80s through the late 90s. There are various definitions for exacting years of this group, but it’s a large categorizations for such a diverse group. Though they are similar in many ways, they have their differences.
However, this Millennial Generation, much like everything else they are doing, is changing our definition of Generation. We can try to generalize them with a variety of psychographics as well as their age, but there are certainly differences between the older and younger Millennials. We can look at them as Leading and Trailing Edge Millennials (even some Pivotals) and see some differences in how they operate.
In a recent article in Forbes and passed on by our friend in the business, Walt Bianchi, it is reported that Trailing Edge Millennials face growing obstacles to home ownership.
There is always a lot of talk about millennials, their lifestyles, and their penchant to become homeowners. Real estate gurus try to predict what they will do next, while the final wave of them is now making the news. Publications like Forbes Real Estate is making its predictions, with writer Brenda Richardson saying that it’s about to get even harder for trailing-edge Millennials to buy their first homes.
“Nearly 45 million Americans will reach the typical age for first-time home buyers within the next 10 years, 3.1 million more than the past decade, creating stumbling blocks in an already challenging market for those racing for a spot in the starter home market,” she says. She continues by saying that the median first-time home buyer in the U.S. is 34 years old with 44.9 million Americans aged 24 to 33, compared with 41.8 million people ages 35 to 44.
Richardson’s research relies on studies by Zillow, which now say that starter homes have gained 57.3 percent in value over the past five years, a median increase of $47,600, while for-sale inventory in this price range has dropped 23.2 percent. Over the same period, the most expensive third of starter homes gained 26percent in value, and homes in the middle third appreciated 36.8 percent.
Non-institutional lender Mr. Cooper (a leading mortgage lender) says reasons Millennials might want to own a home include security, independence, building equity, stability, and financial flexibility. But saving for a down payment is an issue. It is documented that today’s first-time buyers need 18 months longer than they did 30 years ago to secure a loan and that nearly four times as many first-time buyers who obtained a mortgage last year were denied at least once (29 percent) compared to repeat buyers (8 percent).
“The Mr. Cooper report found that 58 percent of aspiring homeowners lack the funds for a down payment,” says Richardson. “Nearly half (43 percent) don’t have a financial plan in place to purchase a home someday; 75 percent would be willing to work a side job if it meant owning a home sooner, and 36 percent would have a roommate if it meant being able to afford a home sooner.”
If you’re looking to buy your first home and feel you can establish yourself just about anywhere for employment, the 3 best markets in the 2019 home shopping season are Tampa, Las Vegas and Phoenix, according to the article, citing relatively affordable markets with median home values well under $300,000. Price cuts in those markets are helping, offering first-time buyers a tad more bargaining power.
On opposite coasts, San Diego and Boston are expected to see the largest jumps in potential first-time buyers with both metros slated to see a nearly 20 percent increase in the next wave of potential first-time home buyers compared with the previous wave.
Richardson explains how buyers making the transition from renting to homeownership help ease rental demand, which holds down rent-price growth. But if those trailing-edge Millennials can’t purchase homes, it could drive up rent prices as well as home values.
Source: Forbes, Zillow, TBWS
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David WB Parker is a principal of Parker Associates of Jacksonville, Florida, marketing consultants to the real estate industry; President of PTC Computer Solutions, IT Specialist, and an active real estate sales professional with Barclay’s Real Estate Group based in Jacksonville, FL. He can be reached at 904-607-8763 or via email firstname.lastname@example.org.