According to the National Association of REALTORS®, millennials make up the largest percentage of new home buyers for 2018. Despite this statistic, some millennials may still be apprehensive when diving into the housing market. Nicole Beauchamp, a Global Real Estate Advisor with Engel & Völkers New York City, suggests that student loan debt, job security and affordability may be preventing millennials from purchasing a new home.
So, here’s why these fears may keep millennials from entering the housing market, as well as some solutions for addressing them.
Student Loan Debt
According to Student Loan Hero, the average monthly student loan payment for borrowers 20 to 30 years old is $351. Including this large payment into a monthly budget can feel overwhelming, as though it will never get paid off. In the past few decades, student debt has exponentially increased financial burden around the nation.
With such a large amount of debt, it may be a challenge to feel confident about moving forward with a home purchase. Student loan debt can be discouraging and disheartening for this generation. Millennials may think that student loan debt is a huge barrier for even starting to look for a home.
Jessica Weaver, CFP, CDFA, of CFS Wealth Advisors, states, “Education is key. Once people learn more about mortgages, student loans and other debt, and know how to pay it off properly, they can make a decision out of confidence instead of fear.”
Do your own research and discover different strategies for addressing debt. You can also enlist the help of a professional, such as a financial advisor. Working with a professional can help you eliminate unnecessary expenses and work toward achieving your goal of homeownership. They can help you discover the tools and resources you need in order to combat your debt.
With the rise of the gig economy and artificial intelligence (AI), job security leaves a lot of millennials questioning the future of their careers. Many are choosing to forgo corporate America for freedom. Deciding to become an entrepreneur may yield a fluctuating income. It’s challenging to save and plan for purchasing a home when you are unsure of what the next few months may bring.
Also, many jobs are being replaced by AI. This was the case for Kristy Sturgill, owner of Caravanning Creative, and her husband. When they found out her husband’s job was going to be replaced with AI, they had to walk away from a new home purchase. They decided to forgo the home purchase and move into an RV. This gave them the freedom and flexibility they were in search of. They were able to travel around the country and save money in the process.
Many millennials are choosing to live similar lives: They don’t want the restriction of being strapped to one location. They want more flexibility and adventure.
Instead of sitting around worrying if AI will replace your job or if you’ll be able to find another client, focus on adding value to the marketplace. There are unlimited possibilities and opportunities for you to enhance your skill set as well as increase your knowledge in any field. Whether you work for yourself or are employed by others, always try to excel and be irreplaceable. The more valuable you are, the easier it may be for you to hold onto a job you love.
According to the National Association of REALTORS®, the median price for an existing single-family home in 2017 was $248,800, which would yield a mortgage payment of around $1,000 with a 20% down payment at today’s average interest rates. (Keep in mind this payment amount doesn’t include insurance or property tax.) This can be a large portion of any millennial’s budget. Combined, down payment, closing costs and moving expenses can be extremely expensive.
Millennials also worry that if they purchase a home then they may not be able to go on vacation or afford new clothes from time to time.
First, you may want to determine how much house you can afford. Look at your budget, mortgage rates, mortgage terms and housing prices in your ideal location. All of these factors play a large role in shaping your budget for your new home. To get you started, try checking out these simple budgets for young adults.
And just because your best friend wants to splurge on a $300,000 home doesn’t mean you need to do the same. Stick to a budget you feel comfortable with and that will still allow you to have the lifestyle you desire. If you find you aren’t happy with homes in your price range and desired location, you can entertain looking in other areas for cheaper options. You may also need to be flexible with your home “must-haves.” This is your first home; it may not have everything you desire.
Purchasing a home is one of the biggest decisions you will ever make. Even if you have debt, are worried about losing your job or think you can’t afford a home, there’s a way to combat all of your fears. Start by doing research. The more you know about the home buying process, the easier it will be when you decide to purchase your first home.
Peter Esho, CEO of CRIBZ, states, “Understand the home buying process from start to finish. Build an A-team of experts. What’s an A-team? People who are experienced to provide you with services and mentor you when things go wrong.”
Working with people who are experts in the industry can help guide you. They can help you navigate the pitfalls some new home buyers may experience. Don’t focus on the cheapest option. Find a professional who will be able to help you with your home buying needs.
Millennials can be apprehensive about exploring the housing market. However, there are countless solutions for addressing any of their concerns. If purchasing a home is one of your dreams, there are plenty of ways you can accomplish your home buying goal. Don’t let any obstacle stand in your way, and seek advice from experts who can point you in the right direction.
Do you have any home buying fears? Leave them in the comments below.
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