Although millennials may have scrimped and saved for years to buy their first home, it probably won't be happening anytime soon.
You Shall Not Pass
Millennials are getting shut out of the housing market at alarming rates. Around 70% of millennials say they cannot afford a home due to the hike in interest rates and home prices. A recent study conducted by the Federal Reserve Bank of St. Louis Center for Household Financial Stability also found that millennials have around 35% less wealth than was predicted based on experiences of earlier generations when they were around the same age.
A vast majority of millennials are renters, and nearly half of the population from 18-34 are rent-burdened. Rent-burdened means that 30% or more of their total wealth goes toward rent.
A recent report published by Unison stated that nationwide, it can take nearly 15 years to save up for a 20% down payment on a median-priced home if you also make a median income. In Los Angeles, someone would need to save for around 43 years. In New York and Miami that number is 36 years and in San Diego the number is 31.
This data indicates that if you are currently 26 years old and want to live in any of those cities, you will be 69 by the time you can afford a down payment.
According to the National Association of REALTORS, the median home price is $329,100 as of March 2021. A few short months later, that price rose to $350,000. Although inflation is a driving factor in the rise of home prices, it is not the sole contributor. Other factors that affect home prices include:
- Housing shortages
- Low interest rates
- Increasing costs of building materials
Don't Forget About Debt
According to the 2020 Better Money Habits Millennial Report, around three-quarters of millennials are saving for life milestones and future goals. That same report also found that more than 75% of millennials are weighed down by large amounts of debt. Carrying too much debt can create a substantial barrier when it comes to saving for a down payment. Credit scores also play a key role in determining whether or not you qualify for a mortgage.
Lending standards have tightened considerably since the 2007-09 recession. The Mortgage Bankers Association reported back in July that mortgage credit availability decreased significantly in June 2021. In order to apply for a mortgage, you will need to present the following documents and information:
- Tax return
- Proof of income
- Bank statements and other assets
- Credit history
- Down payment gift letters
Marriage Rates Are Down Too
Millennials are also getting married at a lower rate than previous generations. Because of the decline of marriages and by proxy, children, millennials may simply not need the space a house would provide.
It is important to do prep work before you begin to shop for a home and a mortgage. You'll need to keep an eye on your credit report and dispute any errors that arise. Determine how much house you can actually afford and look at different types of mortgages that may make home ownership more easily accessible for you.
More Articles From the Wealth of Geeks Network:
- Stock Market Lows With Inflation Have Investors Losing Confidence in Themselves, 63% of Millennials Trust Advisors
- Housing Market Takes Another Devastating Blow, Mortgage Rates Highest in 20 Years
This article was produced and syndicated by Wealth of Geeks.