Friday, May 30, 2014
Impact of Generation Y on The Housing Market
As the housing market recovery continues to push forward,
Generation Y, also known as the Millennial Generation, are
starting to make their mark and are reenergizing the market
across the country. In fact, Millennials now make up 78 percent
of current first-time homebuyers.
What are the defining characteristics of Generation Y? Also
referred to as the Millennial Generation, Eco Boomers and the
Internet Generation, this group has grown up in an environment
of Internet resources, instant worldwide communications, digital
technologies, intense multitasking and rising student debt.
Millennials now make up 78 percent of
current first-time homebuyers.
Although previous generations saw first-time homebuyers
entering the market at an earlier age, typically in their early
twenties, the Millennials have taken their time and are just now,
collectively in their late twenties and early thirties, starting to
enter the market. As the largest generation currently living, these
entry-level homebuyers and their influx of new activity offers
a potential added jump-start to the slowly improving housing
Generation Y faces a few additional barriers. Limited inventory,
increasing home prices and managing a larger student loan debt
than any generation before are all hurdles this group must jump
before actually getting their foot in the door. In addition, the
importance of credit scores in securing a mortgage approval
are more important than ever before – and adaptations to credit
scoring models have made securing and maintaining a high credit
score more difficult for Generation Y and younger consumers
with limited credit lines and shorter credit histories.
What the market is revealing is that
Millennial homebuyers carry a median
income of $73,600 and tend to purchase
older homes averaging 1,800 square feet
and costing around $180,000.
In fact, 20 percent of this age group had to put off a home
purchase in order to save up for a down payment, where
in previous generations they were able to receive financial
assistance from families or dealt with lower down payment
requirements. Of that group, 56 percent said student loan debt
was the biggest obstacle.
The good news is that those who recently bought homes are very
optimistic about their decision. Of Millennials under 33 who
recently bought a home, 87 percent consider their purchase to be
a sound financial investment.
What the market is revealing is that Millennial homebuyers carry
a median income of $73,600 and tend to purchase older homes
averaging 1,800 square feet and costing around $180,000.
As this generation pushes forward, their homebuying activities
will no doubt be closely watched and the impact on the housing
market will be felt across the country.
By Marcus McCue, Executive Vice President Guardian Mortgage Company, Inc.