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Will The Millennial Generation Embrace Homeownership?

Benzinga logo Benzinga 11/27/2017 Unison
a large brick building with a clock on the front of a house© Public Domain

The following article originally appeared on Unison.

A lack of homeownership among the Millennial generation may lead some to believe people born in 1980 or after simply don’t want to burden themselves with a real estate purchase. And there are other reasons to think that’s the case: millennials got a front-row seat to the disaster of the Great Recession, which was largely sparked by the collapse of the housing bubble.

Plus, millennials are known job-hoppers and have a reputation for being more transient than other generations, moving to new towns and farther-flung cities more frequently than their parents and grandparents did at the same age.

But the reality is, Millennials do want to buy homes:

91 percent say they want and plan to own a home someday, whereas only 1.8 percent say they don’t foresee themselves ever buying a house.Over 33 percent say they believe they’ll buy in the next 3 to 5 years.Nearly 24 percent saying they see making the leap in the next 12 months.

The Challenges Of Homebuying For Millennials

These trends beg the question: why? If Millennials are interested in homeownership and they are buying, just later in life, what’s causing the delay?

Learn how a home ownership investment makes it easier to buy a home. 

A number of factors contribute to making homeownership a more difficult milestone to hit in your early- to mid-20s than it used to be.

A full 21 percent of Millennials don’t have any money saved and a whopping 62 percent of people who do have savings have less than $1,000. That kind of money doesn’t buy a house, but Millennials are struggling to put more cash away in their bank accounts.

That could be due to the fact that today’s 20-somethings earn 20 percent less than the Baby Boomer generation did when they were in their 20s. And yet, Millennials also have exponentially more student loan debt to repay than any other generation before them.

The average 20- to 30-year-old pays $351 to student loans per month, and they do it with reduced wages and earnings. The cost of living has also steadily rose, including the cost of rent, meaning most members of Gen Y simply don’t have enough left over at the end of the month to save for their goals — including homeownership.

People In Their 20's And 30's Just Waiting Longer

The financial strain on Millennials is real. But it’s not the only thing that’s driving changes in the “new normal” for what people in their 20s and 30s do with their lives.

Stages of growth and development are simply different for today’s 20- and 30-somethings than they were a few decades ago. Most major milestones happen later in life — that means not just buying homes, but getting married, starting families, and settling into serious careers.

Some use the term “emerging adulthood” to describe what seems like a new life phase for younger generations that didn’t exist for older demographics. That’s not necessarily a bad thing; as the job market changed and the economy had less need for laborers but an increased demand for highly specialized and skilled workers, knowledge and life experience became extremely valuable.

So again, Millennials do express interest in homeownership. But a combination of financial factors and a changing trend in when people in early adulthood actually feel “adult” enough to consider buying a home means that people simply don’t buy homes as young as they used to.

What Millennials Can Do To Prepare For Homeownership

All this means that Millennials likely will become homeowners — eventually. But many of them think they can’t afford it, or don’t understand all the options. The reality, however, is that renting is 38 percent more expensive than buying a home in the current market.

See how a home ownership investment can double your down payment. 

If you’re in the Millennial generation and want to think about buying a home (someday) and start building equity, here’s what you can do right now to make sure you’re well-positioned to afford the home you want sooner than you think:

Make Lifestyle Changes To Reduce Your Expenses. You need to cut costs if you don’t have money left over at the end of the month to save (for a home or any other goal you have).

That might mean keeping roommates instead of living on your own, moving in with family, choosing a cheaper apartment, or evaluating your current spending to cut discretionary purchases like meals out and shopping sprees

Once you create more room in your cash flow, you can set up a line item in your budget for savings and create an automatic transfer from checking to savings to fund your goals.

Look For Ways To Earn More. Wages and salaries are relatively lower than they used to be, but you don’t have to settle for making less.

Take responsibility and be proactive: can you freelance or consult on the side of your job to earn extra money? Can you rent idling assets, like a spare bedroom, to generate income? Is it time to look for a new and higher-paying job, or go after the promotion at work that comes with a pay raise?

Get Your Student Loan Debt Under Control. If you’re struggling with your loans, look into repayment programs and take advantage of any assistance you can get to make your payments more manageable on a monthly basis.

You can also explore forgiveness programs if you qualify. Reducing your monthly payments can help you increase your savings.

Understand What Kind Of Home You Might Want To Buy. Do you research to determine how much a home might cost and how much cash you need to save for a 20 percent down payment. Once you know these numbers, you can set up monthly savings goals to meet.

You may also realize your initial ideas weren’t realistic, so you can adjust and change your expectations. You can look in a different area or for a different kind of home that is less expensive. Or, you can adjust your time horizon: it might not be possible to save the down payment you need in 3 years, but could you make it happen if you give yourself 5 years? Can you buy a fixer-upper?

Look Into First-Time Homeowners Programs And Down Payment Alternatives. Think you need a 20 percent down payment? You actually have more options. You can get a conventional mortgage for as little as 3 percent down or an FHA loan with 3.5 percent down.

Both these choices require you to pay PMI, or private mortgage insurance. If you don’t want to take on the added monthly expense, learn about piggyback loans (or 80/10/10 mortgages) to determine if that option makes sense for you. (Read more here)

Or consider partnering with a homeownership investment company, like Unison. Through their Unison HomeBuyer program they can match up to 10 percent of your down payment. These funds are an investment, not a loan, so it’s a good alternative for home buyers looking for a little more purchasing power or a slightly lower monthly payment.

Almost all Millennials expressed a desire to own a home one day. With these tips and the willingness to explore the options and programs available to make it happen, it’s more than possible to overcome the challenges unique to this generation and buy your first home.


Unison is an editorial partner of Benzinga


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