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Buying Myths Demographics Down Payments For Buyers Gen Z Interest Rates Millennials Rent vs. Buy

The Truths Young Homebuyers Need To Hear

The Truths Young Homebuyers Need To Hear | Simplifying The Market

For many young or first-time homebuyers, purchasing a home can feel intimidating. A recent survey shows some homebuyers ages 25 to 40 may be unsure about the homebuying process and what they can afford. It found:

  • “1 in 4 underestimated their buying potential by $150k or more”
  • “1 in 4 underestimated the increase in value by $100k or more”
  • “47% don’t know what a good interest rate is”

Because they feel uncertain, many young homebuyers have given up on their search, or worse, they’ve decided homebuying isn’t for them and never started on their journey to begin with.

If you’re interested in buying but aren’t sure where to begin, here are three key concepts about homeownership you should understand before you get started.

1. What You Need To Know About Down Payments

Saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As Freddie Mac says:

The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for homes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.

2. You May Be Able To Afford More Home Than You Think

Working remotely, exercising, and generally spending more time than ever in our homes has changed what many people are looking for in their living space. However, some young homebuyers don’t feel they can afford a home that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a home. As an article recently published by NAR points out:

“Many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years…”

Knowing how much home you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.

3. Homeownership Will Become Less Affordable the Longer You Wait

Finally, with mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:

As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a home, there’s no time like the present.

Bottom Line

If you feel overwhelmed by the prospect of starting your home search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.

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Baby Boomers Demographics For Buyers For Sellers Generation X Housing Market Updates Infographics Millennials Move-Up Buyers Senior Market

Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC]

Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC] | Simplifying The Market

Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • If your house is feeling a little cramped with the addition of adult children or aging parents, it might be time to consider a move-up into a multigenerational home that better suits your changing needs.
  • With benefits that include a combined homebuying budget and shared caregiving duties, an increasing number of households are discovering the value of a multigenerational home.
  • With such high demand for houses today, now is a great time to sell so you can upgrade to a multigenerational home that may better suit your evolving needs.
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Buying Myths Demographics For Buyers Millennials

Is Homeownership Still Considered Part of the American Dream?

Is Homeownership Still Considered Part of the American Dream? | Simplifying The Market

Since the birth of our nation, homeownership has always been considered a major piece of the American Dream. As Frederick Peters reports in Forbes:

“The idea of a place of one’s own drives the American story. We became a nation out of a desire to slip the bonds of Europe, which was still in many respects a collection of feudal societies. Old rich families, or the church, owned all the land and, with few exceptions, everyone else was a tenant. The magic of America lay not only in its sense of opportunity, but also in the belief that life could in every way be shaped by the individual. People traveled here not just for religious freedom, but because in America anything seemed possible.”

Additionally, a research paper released just prior to the shelter-in-place orders issued last year concludes:

“Homeownership is undeniably the cornerstone of the American Dream, and is inseparable from our national ethos that, through hard work, every American should have opportunities for prosperity and success. It is the stability and wealth creation that homeownership provides that represents the primary mechanism through which many American families are able to achieve upward socioeconomic mobility and greater opportunities for their children.”

Has the past year changed the American view on homeownership?

Definitely not. A survey of prospective homebuyers released by realtor.com last week reveals that becoming a homeowner is still the main reason this year’s first-time homebuyers want to purchase a home. When asked why they want to buy, three of the top four responses center on the financial benefits of owning a home. The top four reasons for buying are:

  • 59% – “I want to be a homeowner”
  • 33% – “I want to live in a space that I can invest in improving”
  • 31% – “I need more space”
  • 22% – “I want to build equity”

Millennials believe most strongly in homeownership.

The survey also reports that 62% of millennials say a desire to be a homeowner is the main reason they’re buying a home. This contradicts the thinking of some experts who had believed millennials were going to be the first “renter generation” in our nation’s history.

While reporting on the survey, George Ratiu, Senior Economist at realtor.com, said:

“Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have — to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families.”

Odeta Kushi, Deputy Chief Economist for First American, also addresses millennial homeownership:

“Millennials have delayed marriage and having children in favor of investing in education, pushing marriage and family formation to their early-to-mid thirties, compared with previous generations, who primarily made these lifestyle choices in their twenties…Delayed lifestyle choices delay the desire for homeownership.”

Kushi goes on to explain:

“As more millennials get married and form families, millennials remain poised to transform the housing market. In fact, the housing market is already experiencing the earliest gusts of the tailwind.”

Bottom Line

As it always has been and very likely always will be, homeownership continues to be a major component in every generation’s pursuit of the American Dream.

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Demographics For Buyers For Sellers Millennials Move-Up Buyers

Millennials: Is It Time to Buy a Bigger Home?

Millennials: Is It Time to Buy a Bigger Home? | Simplifying The Market

In today’s housing market, all eyes are on millennials. Not only are millennials the largest generation, but they’re also currently between 25 and 40 years old. These are often considered prime homebuying years when many people begin to form their own households and invest in real estate. If you’re like many millennials who are spending much more time at home these days, you may have a growing need for more space or upgraded features, making moving more desirable than ever.

For those millennials who already own a home, there’s a great opportunity to move up in 2021. Danielle Hale, Chief Economist at realtor.com, explains:

“Older millennials will be trade-up buyers with many having owned their first homes long enough to see substantial equity gains.”

Even if you bought a home sometime in the last few years, you may have more equity than you realize, and that’s a big factor to consider when you’re thinking about moving. According to the Homeowner Equity Insights Report from CoreLogic:

“In the third quarter of 2020, the average homeowner gained approximately $17,000 in equity during the past year. This marks the largest average equity gain since the first quarter of 2014.”

Growing equity can be the driver you’re looking for to fund your next move, especially if what you need in a home is changing right now. As equity builds over time, it can be put toward the down payment on your next home.

In addition to equity gains, today’s housing market affordability is powered by record-low mortgage rates, so moving at a time when you can get more for your money may be more realistic than you think.

Bottom Line

If you’re a millennial thinking about moving this year, you’re not alone. Let’s connect to shed light on the equity you have in your current home and the opportunities it can create.

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Demographics For Buyers Move-Up Buyers

More Generations Are Living Under One Roof This Year

More Generations Are Living under One Roof This Year | Simplifying The Market

This year challenged us to reprioritize everything – from the way we use our time to where we work, how we socialize and gather together, and our needs at home. For many, this also meant making decisions about how to best support and engage with our extended families, near and far.

In some cases, we weren’t able to see our relatives and loved ones who were living in senior facilities. In others, maybe older children moved back home. Jessica Lautz, Vice President of Demographics and Behavioral Insights for the National Association of Realtors (NAR), says:

A lot of families have an aging senior relative who was living independently or in senior care and wanted to move them into their home.

These changes led more homebuyers to invest in multi-generational homes to accommodate more long-term plans. A multi-generational home, according to the 2020 Profile of Home Buyers and Sellers from NAR, is a home that has adult siblings, adult children over the age of 18, parents, and/or grandparents in the household.

A recent study from NAR shows that since the health crisis began, there’s been an increase in purchasing trends for homes that cater to this dynamic:

“Buyers who purchased after March were more likely to purchase a multi-generational home at 15% compared to 11% who purchased before April.”

There are many reasons for this uptick in preference toward multi-generational homes. The graph below shows the top two reasons and how they’ve increased this year:More Generations Are Living under One Roof This Year | Simplifying The Market

Bottom Line

More homeowners are making arrangements to accommodate their loved ones so they can safely take care of them at home. If you’re in a similar situation, let’s connect to discuss your options in our local area and maybe even have your whole family under one roof by early next year.

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Buying Myths Demographics Down Payments For Buyers Gen Z Interest Rates Millennials

Knowledge Is Power on the Path to Homeownership

Knowledge Is Power on the Path to Homeownership | Simplifying The Market

Homeownership is on the goal list for many young adults, but sometimes it’s hard to know exactly how to get there. From understanding the homebuying process to pre-approval and down payment assistance options, uncertainty along the way can ultimately hold some buyers back.

Today, there are over 75 million Millennials and 67 million Gen Z’ers in the U.S., making up a significant number of both current and soon-to-be homebuyers. According to a recent Fannie Mae survey of more than 2,000 of these individuals:

“88% said they are confident they will achieve homeownership someday.”

In addition, the survey also reveals that for younger generations, the motivation to own a home may be more emotional than financial compared to previous generations:

  • <50% say they want to use their home as an asset
  • 78% believe it’s the best way to live the way they want, without restrictions
  • 80% believe homeownership is the best way to make it on their own

Whether homeownership goals come from the heart or are driven by financial aspirations (or maybe both), the obstacles standing in the way don’t have to bring these dreams to a screeching halt. The same survey also reveals two key roadblocks for potential buyers. Thankfully, they’re both easily overcome with the power of knowledge and trusted advisors leading the way. Here’s a look at these two challenges potential homebuyers face today:

1. 73% of future homebuyers are unaware of low-down-payment mortgage options

For those who want to purchase a home, low-down-payment options are instrumental to affording one sooner rather than later, especially given the amount of debt many younger adults have accumulated. Fannie Mae also notes:

“Among the challenges they face is an unprecedented amount of debt, along with a lack of understanding of the mortgage process and their own purchasing power. Debt, in particular, creates many obstacles such as a limited ability to save and the fear of taking on more debt.”

Today, there are more than 2,340 down payment assistance programs available nationwide to help relieve this pressure. Understanding what’s out there and the options available may help many buyers become homeowners faster than they thought possible. In a year like this, with record-low mortgage rates making their mark in the history books, being able to take advantage of the opportunity buyers have right now is essential to long-term affordability.

2. 64% of buyers expect lenders and other real estate professionals to educate them about the mortgage process

While many people love to do a quick search online to find instant answers to their questions, it isn’t the only way younger generations want to consume information or build their knowledge base. As the survey mentions, having trusted professionals help them learn what it takes to achieve their dreams is definitely on their wish list too.

Bottom Line

If you’re aiming for homeownership someday, it may be in closer reach than you think. Let’s connect so you can learn about the process and get the guidance you need to make it happen.