Changing populations and their needs are influencing the real estate market, according to Jessica Lautz, research director, demographics and behavioral insights, at the National Association of Realtors®.
“Millennials currently outnumber baby boomers in the housing market and have for several years,” Lautz said. “However, in 2017, the homeownership rate for those under age 35 was just 35.3 percent, which is still down from the peak in 2005 at 43 percent.” The overall homeownership rate is 62.9 percent.
Aspects unique to this generation are affecting how and when they choose to buy a home.
“The millennial generation experienced a 150 percent increase in student debt over the last 10 years,” she said. “And they continue to see growth in overall student debt. Their median debt is $41,200 for the two-thirds of them who are paying on their loans. One-third aren’t paying because they’re still in school, they’re in the grace period or they’re in default.”
A recent study by LendEDU ranked Pennsylvania as having the highest average debt per borrower at $35,185.
When NAR surveyed this group, 83 percent of them said student debt is why they’re not buying. “It’s causing them to delay homeownership by seven years,” Lautz added.
With these market conditions, Realtors® are experiencing a suppressed share of first-time homebuyers.
“It’s difficult for millennials to save and to get their credit in check, especially with this debt level,” she added.
There’s also a misconception with younger buyers about how much is needed for a down payment on a home. “They’re unaware how much they actually need for a down payment and about the programs available to assist them in buying,” Lautz said. “Realtors® can help educate them about the programs that are available.”
These market conditions for younger buyers are one of the reasons that the Pennsylvania Association of Realtors® has been lobbying the state legislature to pass legislation which would create a First-Time Homebuyers Savings Account program. If passed, the legislation would allow first-time homebuyers to deposit money into a savings account, where it goes for the exclusive purpose of purchasing a first home, and the money saved would qualify as a tax deduction for their state income tax return.
“Entry-level buyers will also need to have patience, because finding a home may take longer due to the shortage of affordable homes,” she said. “We’re not seeing a lot of new inventory in the entry levels and it can be difficult. Realtors® can educate these buyers that they’ll find a home that meets their needs, it just may take longer.”
Half of millennials entering the housing market have children under the age of 18, according to Lautz. “Children are helping to drive their decisions. They’re choosing to live in communities with a proximity to schools and a short commute to work,” she noted. “We may also see them become more creative, moving to small communities where it’s more affordable and they can work remotely from their jobs.”