More young adults are ditching apartment living for homeownership.
Many millennials have been driven to buy homes because of rising rents, Bloomberg reports.
Young people are getting squeezed because the gap between rents and incomes is widening to an unsustainable level in many areas of the country, according to a study this month from the National Association of Realtors. In the past five years, the typical rent jumped 15 percent, while the income of renters increased by just 11 percent.
“Rents keep going up,” said Joe Atkins, a self-employed real estate broker overseeing 12 agents in Dallas who lease and sell residences. “A lot of my clients, it’s a better value play to buy than rent. If they can find something.”
With soaring rent, purchasing a home and locking in a fixed monthly payment is a smart financial choice.
Millennials actually made up the largest percentage of homebuyers in 2014, according to the 2015 NAR Home Buyer and Seller Generational Trends study. Lawrence Yun, chief economist for NAR, said he believes the percentage of young homebuyers would be even bigger if millennials weren’t faced with so many roadblocks to homeownership.
Many millennials have endured underemployment and subpar wage growth, and rising rents and repaying student debt have made it very difficult to save for a down payment. For some, even forming households of their own has been a challenge.
One of the dilemmas many younger people face is the extremely high cost of a down payment in some of the cities that are currently the most promising destinations for job opportunities. See our recent story about seeking alternative markets where the price of entry is not as high.
Mom and Dad are helping many millennials buy their own home. According to a recent loanDepot poll, 17 percent of parents with millennial-aged children expect to help their kids buy a home in the next five years. Half of the parents said they planned on helping with a down payment.
“Support from parents is playing a significant role in the housing recovery, and this new research indicates the trend will increase,” said Dave Norris, president and chief operations officer at loanDepot LLC.
Although millennials entering the housing market is a boon to the economy, the share of first-time homebuyers is at its lowest level since 1987, according to the NAR.
“The return of first-time buyers to normal levels will eventually take place in upcoming years as those living with their parents are likely to form households of their own first as renters and then eventually as homeowners,” Yun said.
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