Is Homeownership Possible for Millennials? 3 Tips to Make it Happen
If you’re a millennial, there’s a good chance the current housing crisis has hit you hard. U.S. rents rose 11.3 percent in 2021, prompting many people to look at buying a house. But the real estate market hasn’t been any kinder. Home prices rose nearly 19 percent last year.
Of the millennials who have reached age 40, just 60 percent own homes. That’s compared to 64 percent of Gen X and 68 percent of baby boomers who owned homes by age 40.
Over the years, many people have tried to blame millennials for these discrepancies, saying they just need to prioritize settling down. But in 2022, it’s increasingly clear that millennials face a whole host of unique obstacles.
Why Are There So Few Houses to Buy?
For starters, most millennials began their adult lives alongside a recession. Jobs were hard to come by, and salaries were lower. That alone would be hard to overcome — but it gets worse.
After the housing bubble burst in 2008, construction companies stopped building as many houses. Starter homes, in particular, took the brunt of the hit.
In 1982, when millennials were just starting to be born, 40 percent of newly-constructed homes were considered entry-level (1400 square feet or less). By 2019, starter homes made up just 7 percent of new houses. And zoning restrictions have made it increasingly difficult to build new starter homes.
Millennials aren’t the only ones competing for these starter homes either. Baby boomers looking to downsize have snapped up these small houses with equity and savings. So have investors who can often offer cash. Add to this mess a sudden drop in interest rates to stimulate the economy, and you get a wildly competitive housing market.
In April, the Federal Reserve raised interest rates to 5.28 percent, which could help bring down housing prices. But until those prices drop, it’s only made buying a home more difficult. Millennials face historically high house prices and the highest interest rates since 2010.
It’s no wonder nearly a quarter of millennial renters say they’ll never own a house. But that isn’t the end of the story.
How to Achieve Homeownership as a Millennial
There is hope for millennials who still dream of owning a home. In fact, 48.6 percent of millennials do own their homes. While that’s still a minority, it’s a strong one. It means that despite everything against them, millennials are finding their own paths to homeownership.
For many, buying a house will require finding the right resources and advocates. Thankfully, the internet makes that easier than ever before. If you’re looking to buy a house soon, here’s how we recommend getting started.
- Build Your Budget — for Now and the Future
Before we get into down payment assistance programs, we have to talk about budgeting. According to an Apartment List survey, 63 percent of millennial renters haven’t even started saving for a down payment. It may feel like an impossible hurdle — but that’s why you have to be deliberate about it.
There is an abundance of budgeting resources. Figure out your budget for now, while you save for a down payment. Then figure out your budget for when you own a home so you know what you can afford to buy. eHome America’s Money Management course is a great resource to get you started!
- Find a Realtor Who’s Seen Your Situation Before
Look for a realtor who’s worked with first-time homebuyers who had similar budgets. In a market this hot, it’s easy to get carried away and overbid out of desperation. You want a real estate agent who will help you keep a level head. Interview multiple realtors, and talk frankly about what you can and can’t afford. Watch how they react. Ask them about former clients in similar situations. A good realtor will tell you if your budget is too small, but they won’t pressure you to buy something you can’t afford.
- Get Financial Aid for Your Down Payment
Did you know there are grants, tax credits, down payment assistance programs, and more for first-time homebuyers? All you have to do is take a homebuyer education course! Use this handy tool to find out how many assistance programs are available in your area. Then, sign up for eHome America’s online Homebuyer Education course.
You’ll learn all about the homebuying process from beginning to end. And when you graduate, you’ll get access to the down payment assistance programs in your area. Plus, you get free housing counseling to help you make the best choice.
Homeownership hasn’t been easy for millennials, but it is possible. You just need the right people — and resources — in your corner.