In the face of increasing rental prices, younger Americans are finally turning the corner on homeownership. Millennials, in particular, have had to deal with increasing rents for far too long. The burden has simply become too much to bear, as rents make it nearly impossible to justify anything that resembles a savings account. Subsequently, the prospect of homeownership is that much more enticing. Buying simply makes more sense for those that have become accustomed to today’s rents. More and more Millennials understand one thing: it makes more sense to buy than rent. As a result, spring selling numbers should see a nice boost.
For as much as some people are paying to rent a one-bedroom apartment, they could in fact be building equity in a home. It is becoming cheaper to own in a lot of the major metropolitan areas. That said, younger buyers are expected to take advantage of the buying season this spring. Sellers should certainly expect younger buyers to make up a large portion of open house crowds, or at least more so than they have in the past. If recent years are any indication as to the direction younger buyers are heading, 2015 should see a lot of Millennials actively participate in the housing market. As recently as last year, Millennials made up 32 percent of all home purchases – up 28 percent from two years earlier. According to the National Association of Realtors (NAR), Millennials have now taken over as the largest buying pool, surpassing Generation X.
The expansion of the economy has helped Millennials recover, albeit at a slow pace. However, even slight improvements in the economy have helped younger buyers chip away at mounting student debt, find stable careers, and save up for a down payment. Perhaps even more importantly, the trend looks sustainable. Millennials should only continue to improve their economic status as we further remove ourselves from the depths of the recession. Inevitably, homeownership is the next step for those that have the resources.
According to a report from the NAR, “First-time buyers made up 29 percent of existing-home sales in February, up from 28 percent in January and the first increase since November.”
Prospective buyers are expected to come out in droves this spring. According to Zillow, more than 5 million current renters expect to make the transition from renting to owning this year. No more than a year earlier, only 4.2 million renters expected to purchase a home. Experts suggest that the steep increase in rents is largely to blame for the expected exodus. However, there are still the obstacles of limited inventory, tight credit, and daunting down payment requirements.
Nevertheless, the following is a list of cities expected to see the most renters make the transition to owners:
In spite of rather prominent buying obstacles – a lack of inventory and down payments to name a few – soaring rents and pending interest rate increases are enough to push younger Americans into the buyer pool. Moreover, rent increases are expected to outpace price gains by the end of the year. Landlords hold all the leverage, as historically low vacancy rates allow them to charge more than ever before.
Further increasing the likelihood that more renters will become buyers this spring is an impending mortgage rate hike. More than likely, the Fed is going to increase mortgage rates as early as summer, making the cost of ownership increase. Renters looking to save will want to get into a home before the change takes places, making spring the beneficiary.
Taking all of this into consideration, real estate investors are advised to cater to this new generation of buyers. It only makes sense to appeal to the largest population of buyers. Learn their tendencies and how they like to look for homes. If you can adjust your selling strategies to meet their demands, you should be in a good position to sell your property in a timely and profitable fashion.