Young Buyers a Driving Force in Local Homes Market
For the fourth year in a row Generation Y and Millennials made up the largest portion of American home buyers.
Data released by the National Association of Realtors (NAR) showed adults ages 36 and younger represented 34% of home buyers in 2017. While Generation Y are often distinguished from their older counterparts, the NAR refers to both groups collectively as “Millennials.”
The NAR expects the portion of Millennial home buyers to climb to 44% in 2018, said John Armstrong, President of the Bloomington-Normal Association of Realtors and owner of RE/MAX Rising in Bloomington.
“I see it a lot more now than I ever did: the 22-year-old son is living in mom and dad’s basement saving money for his home purchase," said Armstrong.
Historically, Millennials have been slow to enter the market.
"They were much more cautious of the home buying process because this is the first generation in U.S. history that witnessed their parents losing money on the value of their house.”
Millennials have also faced high unemployment and rising student debt. While they had a median student debt balance of $41,200, Millennials had a median income of just $38,000 according to the NAR report.
In the past, Realtors worried the debt-laden, cash-strapped cohort may never leave the rental game, making the US a nation of renters.
Data from the US Census Bureau showed home ownership rose just slightly in 2017 from previous years. At 64% the country is still experiencing some of the lowest home ownership rates since the agency began tracking the metric in 1965.
Armstrong expects Millennial buyers will help boost those numbers this year.
After renting with roommates or living with family for a number of years, many Millennials have saved enough money to make larger down payments on costlier homes than previous generations, Armstrong said.
“I used to think of first-time home buyers as buying $80,000 to $130,000 houses. Now I’ve seen some first-time home buyers going up to $250,000.”
Millennials are well represented among first-time home buyers, at 66% in 2017, the NAR reported.
Changes in lending practices also mean student debt doesn’t have to be the only thing standing between Millennials and home ownership.
“The way our loan officers are looking at student debt now is perhaps a little more borrower-friendly,” Armstrong said. “If we had to wait until Millennials got out of student debt before they bought homes, our economy would be in a lot of trouble.”
Armstrong said already this year buyers have swarmed the local supply of homes between $150,000 and $250,000, the “bread and butter” of Bloomington-Normal’s real estate market.
“For that price range right now, our market is acting like it’s in its peak (from March to mid-June). We had 85 homes on the market and in the last 30 days; 34 of them have sold.”
Continued low inventory and high demand could drive up already-escalating prices in the busy season, meaning buyers will need to be ready to make a quick decision.
“They’ll be involved in multiple offers,” said Armstrong. “They’ll need to have that pre-approval ready to go. They won’t have time to go home and think about it.”
For homeowners planning to sell this spring, now is the time to consider making updates to attract potential buyers, especially if those buyers are likely to be Millennials.
“Millenials are not interested in anything that hasn’t been updated since 1996,” Armstrong said. “Smart home technology is as important to them as having an upgraded bathroom.” They’re also fans of finished hardwood floors, solid countertops and gray tones.