The fearful millennial is suffering from a number of challenges that might be keeping them from committing to not only a home purchase, but even hunting for a home. Understanding their challenges and perspective on buying a home might help you market to them in a manner that allows you to have a positive impact on their plans to buy.
Fear of Financial Failure
Any child who grew up in a household that suffered due to the financial challenges posed by the Great Recession can logically have a fear of financial failure. Many children who grew up during this time period more than likely either saw their parents suffer a loss or “failure” that led to financial strife, or knew a close friend who might have experienced such a loss in their family. This can have a long lasting effect on a person well into their adult years.
Fear of Debt
In hand with the fear of losing their home, millennials have the highest student debt upon graduation than any other generation before them. The average debt a graduate has is $35,000 compared to $20,000 10 years ago. There is also a sharp increase in the number of graduates with debt up from 64 percent in the last 10 years to 71 percent for graduates graduating with a bachelors today.
This steady rise has made it harder for millennials to consider taking on more debt. However, seeing the first time buyers’ numbers drop has led to many institutions looking for more affordable options to help balance issues for those who are already carrying debt from student loans.
According to NAR there are many potential first time buyers in this age group who don’t even try to apply for a mortgage assuming that because they already have debt, they will be rejected. However, 25 percent of first time buyers do have student debt which shows that there are institutions out there willing to lend them money for their first homes.
New Statistics for First Time Buyers
According to Trulia, two housing preferences unique to buyers in the 25-34 age group are that:
They usually buy a home with intent to move within five years and
They have an average down payment of 10 percent.
They used these numbers in hand with the assumptions that with a 3.85 percent, 30-year fixed rate mortgage and a 25 percent tax bracket it is far more affordable to buy than rent. In fact, this was true in 98 of the top 100 markets in the U.S.
Houston and San Antonio
In September 2015, it was found that in Houston it was 46 percent cheaper to buy than rent and 42 percent cheaper in San Antonio. Millennials who are afraid to make the jump to homeowner, might be less fearful when they understand these numbers. When you combine these numbers with the fact that they are also making an investment when purchasing a home, as opposed to having nothing to show when renting, these numbers are highly persuasive.
As well, Austin, a very popular city for millennials, offers a number of options that make it easy for them to find an affordable home to purchase. Austin has a far higher median home price due to higher end condos and luxury options close to the city. However there are plenty of affordable options in areas surrounding Austin such as Millwood, Buda, Round Rock, Kyle, Georgetown and Cedar Park that come in at very affordable prices in areas millennials are likely to enjoy.
With all of these factors at play, it is easy to see why millennials might be worried about owning a home. However, you can offer assistance to millennials by looking into the areas you can offer them affordable options as well as understanding how financial institutions are assisting them with loans. An excellent resource to share is the link to the Texas Financial Toolbox which will provide them information on all they need to know about financing. It also has a handy mortgage calculator.
Realtour also offers newsletters with information for first time buyers including a First Time Buyers Guide, Mortgage Guide and Home Insurance Guide. Sharing these newsletters is very affordable especially when you choose the monthly subscription as it allows you to send as many newsletters as you like. You can target a specific client or group of clients based on their personal needs and include a personal message letting them know you thought the information would be helpful based on their situation.
One last thought on millennials: According to Zillow, millennials believe that home ownership is “necessary to being a respected member of society, living a good life and obtaining the American dream.” Millennials who have graduated from college and who are also in a relationship or married have a strong income that would make it easier for them to get the mortgage they need to obtain that dream.