Their student loans are making it harder to afford a home, though.
Millennials are in a tight spot with housing. Inventory is low, prices are high, and many are starting families. Could buying a home be more difficult?
Oh yeah, they have higher debts than everyone else. Sixty-two percent of millennials have student loan debt, while only 9 percent of Gen Xers do, says a study from Realtor.com.
“Existing debt and lower down payments leave younger shoppers more exposed than others to the impact of rising mortgage rates and record-high home prices,” says Danielle Hale, chief economist for realtor.com. “These obstacles won’t prevent millennials from finding and buying homes, but most will have to adapt to these challenging market conditions by adjusting their home search.”
Millennials’ homebuying obstacles
Nearly a quarter (23 percent) of millennials say they need to buy a home due to high rents. Housing and Urban Development data shows that rents have risen in 85 of the top 100 cities in the U.S., according to the survey. That includes nine cities with a 10 percent, and higher, increase since last year.
Debt.com previously reported that millennials are buying homes without seeing them in person first. And why are they doing that? Aside from being a digital-focused generation, desperation to beat out the competition.
Housing inventory is down 20 percent from last year, according to real estate company Redfin. The demand is so high that nearly half (45 percent) of millennials are making a purchase without touring the home, says Redfin. Now a poll of more than 1,000 potential homebuyers tells us that millennials need to flee high rents. But, are struggling to afford the costs of homeownership.
The vast majority of millennials say the rise in home prices (93 percent) and interest rates (92 percent) will impact their search. That’s compared to all other age groups, with 83 percent and 79 percent saying so, respectively.
And high rents are just one factor contributing to millennials decision to purchase over renting. Compared to older generations, millennials have an increasing need to house a family. More than 20 percent of baby boomers cite privacy as their main goal for purchasing a home, compared to 17 percent of millennials who say fulfilling family needs is their main goal.
“We found some clear differences in priorities,” Hale says. “For instance, older buyers are concerned with privacy and being able to age comfortably, while millennials place more emphasis on family needs, stability, and personal expression.”
Generational debt disparity
To deal with the increase in rates and mortgages more millennials plan to purchase smaller homes (41 percent), look for less expensive homes (35 percent), look in a different neighborhood (34 percent), put down a larger down payment (33 percent), and increase their monthly budget (31 percent), more than all other homebuyers on the hunt.
On top of that, millennials carry more debt all around, according to Realtor.com.
Millennials’ current debt
- 78 percent: Credit card debt
- 68 percent: Car loan
- 62 percent: Personal loan
- 62 percent: Mortgage debt
- 61 percent: Student loans
- 57 percent: Home equity loans
Gen Xers’ current debt
- 72 percent: Credit card debt
- 59 percent: Car loan
- 55 percent: Personal loan
- 60 percent: Mortgage debt
- 49 percent: Home equity loan
- 49 percent: Student loans
Baby boomers’ current debt
- 45 percent: Credit card debt
- 30 percent: Car loan
- 12 percent: Personal loan
- 32 percent: Mortgage debt
- 11 percent: Home equity loans
- 9 percent: Student loans
Millennials’ high debt results in this generation having to put the least amount of cash down on their purchase. Millennials are most likely to put down only 10 percent on a home, and the least likely to put a 20 percent down payment.
Thirty-seven percent of millennials plan to put down 10 percent, compared to 34 percent of Gen X, and 20 percent of boomers. While, roughly 1 in 4 millennials can afford to put 20 percent down, compared to 1 in 3 Gen Xers, and 1 in 2 baby boomers.
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Article last modified on May 2, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: High Rents Are Forcing Millennials Into Homeownership - AMP.