As many older millennials are looking to settle down, buy a home and start a family, the rising cost of real estate is pricing many out of the market all together. Egged on by low interest rates, the real estate market has boomed over the last two years, with housing prices up 20-30% since the pandemic began, making buying a home less affordable than ever. Millennials in particular face unique challenges when searching for a home.
Saddled with student loans, a recent study showed that 36% of US millennials say such debt is preventing them from owning a home. They are stuck between buying a house that may be overpriced or spending upwards of a third of their salary to afford the astronomical rental rates in the Philadelphia area and around the country. Making matters worse is a single-family housing shortage caused by a lack of development over the past 10 to 15 years.
The pandemic showed us one thing when it came to living arrangements: people want and need more physical space. Millennials that previously felt comfortable in a one-bedroom or studio apartment moved to the suburbs in large droves, many to their family homes, and saw the monetary and health benefits of single-family living. Despite the pandemic fading into the background of people’s lives, we’re not seeing millennials return to the cosmopolitan cities that they once called home. While baby boomers are selling their suburban homes to younger generations as they retire and downsize, single family homes are still in short supply.
After the mortgage crisis, developers moved away from single family homes in favor of multi-family complexes. But now, with so many individuals looking to buy houses, desirable single-family homes are in short supply. With higher costs for new construction, recent interest rate hikes and expected future increases, new houses are lagging the demand and unable to meet the current surge we’re seeing.
Due to current economic conditions, millennials are facing many challenges when trying to break into the housing market. Working from a position of debt, inflation in tandem with rising interest rates and a very competitive housing market has made it increasingly challenging for first-time homebuyers, many of whom are older millennials, to own a home. Paired with the single-family housing shortage, created by developers in the late 2000’s, many millennials have an uphill housing battle.
Homeownership can be incredibly rewarding and a sound financial investment, but current market conditions can make it stressful. It is helpful to work with an experienced Mortgage Loan Officer who can help navigate the process. In addition, many lenders off informative articles and seminars for first-time homebuyers. While inventory is challenging at the moment, the future looks brighter. The amount of single-family housing is expected to rebound over the next few years as development increases which should help allow more millennials to achieve their goal of homeownership.
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