Millennials, the generation once ridiculed for overspending at brunch, now make up the largest group of homebuyers in today’s competitive real estate market, according to a Generational Trends Report released by the National Association of Realtors (NAR) in late March .
The proportion of millennial homebuyers has increased significantly over the past year, from 37% in 2021 to 43% now. Millennials tended to buy larger and more expensive homes than older generations and flocked to suburbs and small towns rather than city centers.
“While the pandemic has allowed many potential buyers to save up for a down payment, demographics have played a key role,” said NAR Vice President Jessica Lautz. “There’s a wave of millennial shoppers aging into the traditional age group of first-time buyers.”
The data comes at a time when buying a home is a challenging endeavor. While student loan debt remains a significant stumbling block for younger millennial shoppers, both mortgage rates and home values have skyrocketed in recent months.
Read on to learn more about buying a home in a competitive seller’s market with high listing prices and low inventory. You can start the process by comparing mortgage rates for free on Credible without affecting your credit score.
THESE ARE THE CLOSEST NEIGHBORHOOD CITIES IN AMERICA, RESULTS OF THE STUDY
Median home selling prices surpass $400,000 for the first time in history
Home prices set another record in March, when the national median selling price rose to $405,000, according to a Realtor.com housing market trends report. That’s a 26.5% increase in costs over the past two years, causing some homebuyers to “just give up.”
“In this month’s data, we’re seeing signs of weakening demand in response to higher costs,” said Danielle Hale, Realtor.com’s chief economist. “We are seeing at least some buyers in today’s housing market thinking twice given the high costs they face as both house prices and mortgage rates rise.”
Soaring mortgage rates can pose a barrier to potential buyers, driving up monthly payments and increasing the overall cost of borrowing. Average 30-year mortgage rates topped 4% in March, the highest rates since 2019, data from Freddie Mac showed.
WHAT TO CONSIDER WHEN BUYING A FIXER UPPER
But despite cooling demand, house prices may not fall anytime soon. The COVID-19 pandemic has only exacerbated existing housing supply shortages, Zillow research says, and stockpiles may not return to pre-pandemic levels until 2024. Bureau of Labor Statistics data showed that record-high inflation is also pushing up American wages, which could justify increased housing costs for high-income buyers.
“While demand has shown some signs of moderation, this could help keep demand and house prices high if buyer incomes rise faster due to the tight labor market,” Hale said.
If you’re considering buying a home or refinancing your current mortgage in this interest rate environment, it’s more important than ever to look for a competitive loan offer. You can visit Credible to compare mortgage purchase and refinance rates from multiple lenders.
ARE BABY BOOMERS TO BLAME FOR THE HOUSING SHORTAGE?
Tips for buying a house in 2022
Despite facing a grueling housing market, the vast majority (86%) of buyers surveyed by NAR still have a positive attitude towards homeownership.
“A truth across generations is that home ownership is viewed as a cornerstone of the American Dream,” said Leslie Rouda Smith, President of NAR. “From building personal wealth and nurturing communities to enhancing social stability and fueling the national economy, the value of home ownership is undeniable.”
If you’re motivated enough to buy a home in this year’s real estate market, you can follow these tips to ease your transition from homebuyer to homeowner:
- Look for homes that have been on the market for a while. Familiarize yourself with the average number of days homes in your area spend on the market before they’re signed. The seller may be more willing to accept your offer if the house has stood too long.
- Expect to pay more cash upfront A house does not appreciate. Sellers can waive their obligation to meet the appraised value, meaning buyers should be prepared to pay the difference in cash if a home is not appraised for sale.
- If you can’t afford to pay more, be flexible with your graduation date. While sellers typically want to close as soon as possible, some may want a longer closing period of 60 or 90 days. This can give sellers more time to buy a new home or get their mortgage financing in order.
- Be prepared to wait and see the market there Inventory can change a lot from one week to the next. An open line of communication with your real estate agent is key during your search. And keep your schedule open so you can tour newly listed properties as soon as possible.
- Get a mortgage pre-approval letter to let sellers know you’re a serious potential buyer. Some lenders offer signed or verified approval letters, which can help differentiate your offering. You can begin the mortgage pre-approval process by visiting Credible.
You can browse the current mortgage rates in the table below and see free mortgage quotes tailored to your financial situation on Credible.
IS A STARTER HOUSE WORTH IT?
Do you have a financial question but don’t know who to contact? Email The Credible Money Expert at email@example.com and your question could be answered by Credible in our Money Expert section.