Home ownership is part of the big American Dream for many and this includes the Millennial generation as they leave college and start to forge their own identity in the world. But even as many Millennials may have their heart set on checking off that proverbial box, things are not going to be easy in terms of actually buying a home.
Ellie Mae is a software company who analyzes mortgage data. The company says that the Millennial population actually makes up the largest group of homebuyers in the country. In January, for example, Ellie Mae counted that Millennials represented roughly 45 percent of the entire purchase loan customers, which is up from 42 percent over the same month last year.
However, Realtor.com manager of economic research, Javier Vivas comments that this trend may not continue. He says, “Millennials are mostly first-time buyers and they are competing against repeat buyers who have more buying leverage and experience,” adding that Millennials have only recently become the dominant home buying population.
And while Millennials may be excited to buy homes, they are facing two big obstacles. First of all, they have to compete with older home buyers (who might have better credit, for example) who have been looking for awhile. These buyers are more poised to sign a mortgage than first-time buyers in the Millennial population. Secondly, though, there is a shortage of available homes, and particularly in the “starter homes” category.
That presents another problem, too: Low supply and high demand means escalating prices. Real estate website Zillow reports that available homes were 3 percent lower this February than from February of last year while home values have jumped 7 percent. This, of course, makes it a seller’s market.
And with that, Millennials have to face an even tighter lending environment when compared to just ten years ago. Unfortunately for Millennials, banks are stiffening credit requirements, but if you can get a home loan, you will be able to take advantage of lower interest rates and better home ownership programs than generations past.
Ellie Mae executive vice president Joe Tyrrell comments, “If you compare their access to credit and ability to get into a home, it’s far easier for Millennials than previous generations. Back when Millennials’ parents were buying homes, they had higher interest rates and there weren’t down payment assistance programs.”