As seen in syndicated newspapers
According to a pair of new studies, Millennials’ disinterest in owning a home is a myth
By Erik J. Martin
Don’t believe the hype. Contrary to popular belief, the vast majority of Generation Y, better known as Millennials, want to own a home, and most actually do, new data suggests. That’s good news for boomerang parents whose twentysomething-aged offspring moved back home in recent years due to the economic downturn.
There is a common misconception that Millennials aren’t motivated to purchase real estate nowadays. But the findings of a new study by survey firm Qualtrics indicate that 53 percent of Millennials currently are homeowners and 88 percent in this demographic who don’t yet own desire to do so.
“Those are higher numbers than I thought,” said Jason Polancich, co-founder of HomePocket, a Miramar Beach, Fla.-based online real estate listing service. “But it shows that homeownership remains an important part of the American DNA. And with trillions of dollars changing hands to the Millennials in the next decade or two from inherited wealth alone, I think homeownership will be even higher in this group than for earlier generations.”
The Qualtrics findings echo those reported by ValueInsured, whose recent homebuyer survey reveals 83 percent of today’s Millennials believe owning a home is an important part of their personal American dream.
“The misconception that Millennials somehow don’t want to own a home lies in the fact that they want to own a home differently than their predecessors,” said Joe Melendez, founder / CEO of Dallas-headquartered ValueInsured. “Understand that Millennials grew up in a technology age that drives new consumerism in trial size, short vignettes and forms of sharing. For them, mobility is the new normal. They change jobs now on average every 2.8 years, according to the latest U.S. Census employment data.”
According to Melendez, a Millennial who graduates today carries, on average, more than $37,000 in college debt. That kind of financial pressure contributes to the need to delay homeownership.
“Partly because of this high personal debt and an increase in moving and traveling, Millennials are also getting married and having children later. Obviously, these have traditionally been the major life-stage precursors to home buying,” Melendez said.
Jeff Benach, principal of Chicago-based Lexington Homes, which sells a good portion of its new construction units to Gen Y, says it’s no secret why Millennials shied away from the real estate market over the past several years.
“Most of them came of age just prior to and during the recent recession,” Benach said. “Many young Millennials flocked to purchase homes during the go-go years of 2003 through 2006, but once the economy started imploding in 2007, housing values plummeted for several years. This scared them away from the risk of homeownership.
“But as we get further away from that and continue to see a steady increase in overall housing values being more the norm, they’ll start to feel more comfortable that the reward outweighs the risk.”
Millennials who want to increase their chance of purchasing a home need to get their financial houses in order first.
“Pay off your debts, maximize your FICO credit score to qualify for the most favorable loans and don’t be shy about asking to borrow from your parents for a down payment,” Melendez said.
In addition, establish a realistic monthly budget.
“Consider what you can afford for a monthly mortgage, down payment and home repairs and upgrades,” said Melinda Wilke, wealth management advisor for Northwestern Mutual in Hales Corners, Wis. “Your total monthly housing expenses should not exceed 28 percent of your pretax income or 36 percent when combined with all other monthly debt like student loans, car payments and credit cards. Work with a real estate agent and financial representative to understand what you’ll need to cover, when and for how much.”