Many real estate agents and home builders have noticed a major trend in recent years: the average age of their clients has increased. Young buyers simply haven’t been buying homes like they used to, especially Millennial buyers. Many people think of Millennials as young 20-somethings, but that’s not the case any longer. The “Millennial” period runs from the early 80s to the late 90s, and many of the younger Millennials are in their mid-30s now. They’re at the age where they have completed their education and settled into their careers. Many are married with children.
Yet they still aren’t buying homes.
Why? There are a number of reasons why young buyers aren’t purchasing homes like they once did, and a large part of that is due to barriers that are preventing them from buying homes.
They Don’t Need a Home
While many young buyers are now married, many of them are not. In fact, a Gallup Analysis shows that more young Millennial buyers are single and have never been married than those born in other generations. This means they may not need a house. They don’t have children, so they don’t need the extra space.
Others simply enjoy the convenience of renting an apartment. They don’t have to handle any yard work, and if something breaks, they can call the landlord and have it dealt with. Owning a home is an additional headache that they don’t want or need at this point in their life.
One of the biggest issues young buyers face is financial barriers. Properties are no longer as affordable as they once were due to the fact that the housing market has recovered from the recession. It’s doing very well, driving prices up.
This means younger buyers may not be able to find the home of their dreams in their price range. These buyers aren’t happy with the idea of settling, especially when settling comes with a mortgage payment. They would rather not buy a house than buy one that’s not what they’re looking for.
The Down Payment
Many young buyers are either unable to make the down payment or are very uncertain about putting that much money down on any purchase. Almost 45 million Americas are still dealing with a large amount of student loan debt and aren’t eager to take on more debt. The auto loan industry has also seen major growth in recent years, which means many of these potential buyers have a car loan on top of their student loan debt.
Others haven’t been able to save as much money as they would like and would have to ask others for gift money, something they may be reluctant to do. A number of people aren’t even aware of how much money they would need for their down payment. They’re imagining some very high numbers and believe they can never save that much. Many have heard that they need to have 10% to 20% of the purchase price as a down payment, but that’s no longer the case.
Many younger buyers can take advantage of first-time homebuyer programs. These programs don’t require any more than 3% to 5% of the purchase price. That’s a much more manageable number.
They Don’t Think They Have the Credit Score
Another barrier to homeownership is the all-important credit score. Many people think they have to have an outstanding credit score in order to get a mortgage. However, that’s not the case. Many lenders are willing to consider those with a score as low as 620. That’s a fairly average credit score. Unfortunately, many people think they need to have near-perfect credit, which just isn’t true. There are upwards of 19 million people who could apply for and receive a mortgage, but they aren’t, and some of those are not looking to buy a home because they don’t think they have the credit score to do so.
They Don’t Understand the Buying Process or Requirements
Another barrier related to the down payment and the credit score is a simple lack of information. Some young buyers don’t know how much of a down payment they need or the required credit score for a mortgage. They don’t realize they could easily be approved for a house and make the down payment without much of a problem.
Others don’t realize they can get help with the down payment. Assistance programs, gifts from family members, and other options are available. A new homeowner doesn’t have to come up with all of these funds themselves. They can purchase a house if they want to—they have the credit, they have the funds, and they can make the mortgage payment. Many, in fact, may be very surprised to learn that their mortgage payment will be the same or even less than their rent!
While there are barriers that young homebuyers face, many of these barriers are not as impassable as they may believe. With some education on the mortgage process and requirements, a number of young people would be surprised to learn that they can buy their dream home today, not sometime down the road.