Here come the millennial home buyers. Finally.
For the past decade, since the Great Recession forced so many Americans to put their lives on hold, the world of real estate has been praying for the arrival of millennials on the home buying scene, to begin buying, selling, fixing up and financing property.
It has been quite the waiting game. When I first started writing about real estate, the average age of a first-time home buyer was about 26. Today, it’s nearly 33. Over the past 25 years, we’ve watched millennials wait an extra seven years to buy their first home.
There are lots of explanations for the millennial home buying delay:
– Millennials who graduated from college in 2008 to 2012 found a weak job market;
– Many of them moved home instead of moving out with a friend (or by themselves) and renting their own place (typically a precursor to home buying);
– Roughly a third of them are still living at home;
– Older millennials watched as parents lost jobs, tapped their 401ks to survive, and took jobs that paid less (and often didn’t offer benefits), and their families struggle to make ends meet. Millions of homeowners couldn’t sell when they needed to and lost their homes to foreclosure, destroying credit histories and confidence in the process.
And, when you lose confidence in yourself and your ability to pay the bills, it’s awfully hard to make the commitment to buy something as large and as permanent as a house.
Millennials also have cash flow issues, thanks to a huge amount of student loans. About 44 million Americans are paying off student loans these days, to the tune of $1.4 trillion. The average amount of student loan debt has tripled over the past 20 years, and 2017 graduates were carrying about $36,000 worth of student loans as they made their way out of college and into their adult lives.
Here are some facts about millennials and student loan debt that make the real estate industry very nervous:
– Some 58 percent of college graduates reported having student loans;
– 44 percent don’t know the difference between private and federal loans;
– 45 percent don’t know what percentage of their budget goes toward paying down student loans;
– 37 percent don’t know what interest rate their loans carry;
– 15 percent don’t even know how much they owe;
– Default rates are running between 7 and just over 11 percent, depending on the type of loan and whether the school was private or public, according to the Department of Education.
For those millennials who are making their payments, paying off student loans can delay home buying because monthly debt service payments are deducted from the amount someone has available to repay debts.
One of the reasons that millennials are aging into becoming first-time home buyers is that they’re finally getting married and having children.
If you’re single, or even if you’re in a long-term relationship but without kids, you’re probably not looking for a condominium, much less a house in the suburbs with a good school district. And, because you’re changing jobs fairly frequently, having a longer-term commitment to real estate isn’t particularly high on the list.
But times they are a changing. According to the latest figures from the National Association of Realtors, millennials accounted for 34 percent of home buyers in 2016, the latest year data is available. And, almost all of them were buying homes for the first time.
To which the real estate industry says, “Amen!”
By Ilyce Glink, Samuel J. Tamkin, Tribune Content Agency
Ilyce Glink is the creator of an 18-part webinar+ebook series called “The Intentional Investor: How to be wildly successful in real estate, “ as well as the author of many books on real estate. She also hosts the “Real Estate Minute,” on her YouTube channel. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.