According to a 2018 Home Buyer and Seller General Trends study from National Association of Realtors (NAR), Millennials or Generation Yers, are beginning to show a marked interest in plunking down roots. In fact, these young adults, aged 37 years and younger, have made up the largest share of home buyers, consistently, for the past few years. They are the largest generation in the country now, surpassing Baby Boomers.
“We have a dreamer generation that graduates college later, gets married later, has a desire to travel, and overall, millennials are more comfortable with a year-long rental commitment than owning a home,” said Bubba Bryant of Home in the South Realty. “That being said, in 2018 millennials had the highest percentage of homebuyers at 36% compared to older generations.”
There’s been an uptick in this group purchasing suburban homes and according to the NARS report, 48 percent have children. Married millennials comprise over 65 percent of those buyers.
The times, they are a changin.’
The Switch to Buy & Why
In the past, millennials tended to be a bit squeamish about taking the home buying plunge. Renting gave them the mobility to move. Committing to a city or neighborhood wasn’t something that was appealing; especially as this group, more than any other demographic tends to change professions more readily.
According to Laurel Cockfield of Charleston New Construction Experts, that trend is changing for millennials in the Lowcountry.
“The Gen Xers want good school districts, new construction or remodeled homes, “Cockfield said. “Baby Boomers look for neighborhoods that offer a ‘lifestyle’ for them. Community togetherness with amenities and outdoor activities seem to be important to both.”
Credit scores for home purchasing were once fairly strict and required a minimum of 20 percent down if that score was below 680. Millennial buyers tend to have student debt and that debt, according to a 2018 analysis by Lending Tree, put their average score at around 656.
Enter the new UltraFico™ Score which allows these buyers and others with lower scores to realize the American Dream. The new system employs a new system of credit worthiness by linking bank account information—checking, savings and money market accounts—which could indicate whether a person is financially responsible. Banks and other lenders may use the new system as a predictor and if so, a new generation of buyers could see an improvement in that all important FICO score.
A 2018 Money Market magazine online article reported that the most recent Census data concluded millennials made anywhere from under $60,000 to over $80,000, depending on location, education and other variables. The majority of those lower wages are in the south, with Mississippi ranking the lowest with a median income of about $53,000. Areas such as San Francisco, Washington D.C. and New York may account for higher earnings, but median home prices in those areas oftentimes won’t allow buyers to purchase.
The introduction of UltraFico™ will inevitability help with buying, but finding properties within budget is still a sticking point for some. According to the Clever Real Estate Blog’s 2019 Millennial Home Buyer Report, “Saving for a down payment is the biggest barrier to entry for millennial home buyers. . .”
Millennials in the lowcountry
As real estate continues to grow in the lowcountry, so do the prices. According to Bryant, there are three definitive areas these buyers are gravitating towards—for convenience to Charleston and for affordability.
“West Ashley, James Island and John’s Island are where they’re finding the most affordable properties. Now that construction has been approved for the 526 extension, John’s Island will top that list soon,” Bryant explained.
“I’ve sold several homes to first-time home buyers, single and in their mid to late twenties. Goose Creek is a hot spot central location (for them) and the price point is good, low to high $200s,” Cockfield added.
The Future is Bright
The good news is that despite rising interest rates and home prices, millennials view owning a home as a solid investment and a goal that they’re more than willing to work hard to achieve. Nearly 80 percent of them are first-time home buyers and they don’t mind putting a little elbow grease to fix up a home if that’s what they can afford.
In addition, millennials are prepared when they are ready to take the home plunge.
“Millennials have command of the internet,” said Bryant. “They do their research.”
Debbie Smith of Charleston Metro Homes Real Estate agreed. “Millennials are different than Gen Xers and baby boomers in the fact that they refer to more technology for buying decisions and they are quicker to make a decision.”
What’s more in the Lowcountry, these young buyers look toward that bright future as investment strategies when it comes to home buying.
“They are looking at purchasing from an investment standpoint. Many are looking at multifamily units to live in one and rent out the other one,” Smith said. “The trend shows no indication of reversing in 2019, as more millennials in their early to mid-thirties get married and have children, they will continue to drive the demand for homeownership.”
According to Bank of America’s 2018 Fall Homebuyer Insights Report, millennials see homeownership as their number one priority, with being able to retire and traveling the world coming in as second and third on their list of life achievements.
With tools that allow them to secure better credit scores and with that security, less money down to purchase a home, they too can achieve the American Dream. This generation of home buyers is savvy, with a focus on the future and an attitude of change being a very good thing indeed.
- The majority of millennial home buyers are white (58% of respondents compared to 8% of African American respondents)
- 20% of millennial home buyers are living with a partner, but not married (more than any other generation)
- Millennials are 52% more likely to buy a multi-family property compared to Generation X and Baby Boomers
Source: The Clever Real Estate Blog