Millennials are facing a different housing market than the one their parents and grandparents faced. According to Business Insider’s Steven John, the Millennial housing market is defined by…
- Home prices +39% higher than home prices their parents encountered in the 1980’s.
- 70% of recent college graduates having an average student loan debt of $29,800 plus interest to repay.
- Buying different types of homes in different locations than their parents.
- Buying homes under different circumstances than their parents bought such as waiting longer to buy, buying prior to marriage and many are living with their families longer in order to save cash.
In the past three decades, home prices have increased 39%, far outpacing wage increases. For a longer view, the average home today is priced +70% higher than a comparable home in the 1960’s.
The cost of renting has increased +46% over the last 50 years making affording to rent harder than it has ever been, let alone saving for a down payment.
Today’s Millennials have turned to “super commuting” to find homes they can afford. Super commuting is defined by commuting one hour or more in each direction. Buying in the suburbs or exurbs with a daily two-hour round trip commute to work is now an acceptable norm.
Of the nation’s top 50 metro markets, 33 of those markets have seen increases in Millennial buying. One in three Millennials tapped into his/her retirement account to get the cash for the down payment or, if they didn’t take cash out of her/his account, they took out a loan against that retirement account in order to pay for the purchase.
Millennials are wanting to buy smaller, less maintenance-heavy properties rather than the mini-mansions so popular with previous generations. As a result, according to the Wall Street Journal, there has been a steep drop in value among many homes Boomers are wanting to sell as they downsize. Multi-million dollar homes in places like Scottsdale AZ are selling at nearly 50% discounts because Millennials are not interested in so much space.
Unfortunately, nearly two thirds of Millennial homebuyers have buyer’s remorse. Why? They miscalculated purchase costs as well as ongoing home maintenance expenses and demands.