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 
market.

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.