Millennial Homebuyers, Faced With a Tight Market and Heavy Debt, Still Forge Ahead

April 24, 2017

As interest rates creep higher and housing markets across the country  report lower inventory, the spring house-hunting season looks set to be  intense – and perhaps even more so because of a rising number of young  buyers testing home ownership for the first time.

Economists and  real estate agents alike are carefully watching Millennials – one of the  largest demographics to reshape the American economy since baby boomers  – to see not only what kind of effect this debt-laden, tech-savvy  generation could have on the housing market but also when it may peak.

“We're  seeing this wave start to crash,” says Len Kiefer, deputy chief  economist at Freddie Mac, a public government-sponsored home loan  mortgage corporation in Washington D.C., in an interview with The  Christian Science Monitor. “[Millennials are] taking a bigger part of  the market as you might expect, given their size and the fact that  they're getting closer to their age where a lot of them will be looking  to become a homeowner.”

While more than half of those under 35 years old still rent, Millennials made up the largest group of  first-time home buyers at 66 percent in 2016, according to consumer  reports from the National Association of Realtors (NAR). And in January  2017, data from software company Ellie Mae, which tracks mortgage data,  shows Millennial buyers accounted for 84 percent of closed mortgage loans.

“[T]he  Millennial generation ... is just delaying a lot of life stages  relative to earlier generations, and that sort of pushes where  homeownership would fit in that picture a little bit later,” says Mr.  Kiefer. 


And that could bring additional heat to an already tight housing market this spring.

When  it comes to home ownership, Matt Culik and his wife were ahead of the  trend for the average Millennial. The couple purchased their first home  in 2011 when they were 26 years old and still saddled with a substantial  amount of debt from college loans.

“The student debt was a  budget factor … but it was not a factor to get a mortgage,” Mr. Culik  tells the Monitor in a phone interview.

Now, six years later as  more Millennials have aged up and started to put down roots, Culik says  home ownership is not that uncommon among his friends. But he admits the  initial home buying process could be a bit terrifying for his peers, who  would sooner look online for answers on how to secure a mortgage and  find a house instead of cold-calling mortgage and real estate brokers.

“We  were very lucky to have a great agent and a lawyer and they walked us  through the process,” says Culik, who now works in digital marketing for  Century 21 in New Jersey. He adds that they turned to real estate  professionals after not finding enough guidance through online searches.  “It was weird for us ... we kind of needed to trust those people, and  for our generation, that's a bit weird, but it all worked out.”

Marketers  have been quick to clue into the fact that while young adults are  increasingly connected to and dependent on the internet, that doesn't necessarily translate into being well-informed when it comes to making grown-up decisions, like buying a home.

Jessica  Lautz, managing director of survey research at National Association of  Realtors, says that 92 percent of Millennial home buyers used an agent to  help them each step of the way, from finding the right home to  negotiating the terms of the sale.

"Helping  them navigate the tight inventory to find that perfect home for them is  so important for Millennial homebuyers," says Ms. Lautz. "They are  using technology in their home search process, but they are using it  hand-in-hand with a professional." 

To aid this growing market of  first-time home buyers, real estate marketers have launched marketing  campaigns to make the process more approachable. For instance, in March,  Century 21 launched “Adulting 101,”  an online resource with articles that touch on a range of life lessons  such as office etiquette, personal finance, and how to stock your  pantry, in addition to strategies for wading into the real estate  market.

But even if Millennial's are ready to take the home  ownership plunge, a housing shortage could still keep affordable options  just out of reach.

“With  fewer homes on the market and a lack of inventory continuing to offer  buyers fewer choices, it is expected that the Millennial or first-time  home buyer share of the market will hover around 33 percent of all  existing home sales in 2017,” Cara Whitley, chief marketing officer of  Century 21 Real Estate, says in an email to the Monitor. 

Yet all signs point to a growing resolve among Millennial's to face economic uncertainties and forge ahead.