Despite the reports of Millennials buying homes, there is an interesting trend happening in our housing market. We have homeowners who are content to stay in their current homes and an aging homebuyer. Let’s take a closer look.
American moves are the lowest on record.
According to the Wall Street Journal homeowners are staying in their homes longer which is slowing homes sales. This despite of favorable interest rates. The U.S Census Bureau reports that Americans are moving at the lowest record since the Bureau starting keeping track in 1947, especially millennials. America has always been the land of opportunity and throughout history Americans have moved to where the opportunity is. According to the New York Times Americans are “Frozen in place, moving at the lowest rate on record” with only 9.8 percent of Americans having moved in the year ending in March. In the 1950s, about one-fifth of the American population moved each year.
American migration is typically higher among the young who move to the city and growing suburbs where there are jobs and rent is reasonable. With rents in cities exploding and dwindling housing inventory movement is not as much of an option with the exception of college graduates. Economists are now studying the declining American mobility, and determining if this is a good or bad thing. If anything, it is an expected trend to see among the baby boomers, but necessarily one we expected to see across the board.
The median age of homebuyers is rising.
The median age of U.S. homebuyers is now 47, an increase of 8 years since the financial crisis according to REALTOR.com. The median age of first-time home buyers has increased to 33, the oldest in records dating back to 1981, according to a National Association of REALTORS® report. The median age of all buyers also hit a fresh record, 47, increasing for a third straight year -- and well above the median age of 31 in 1981.
Today’s Homebuyer Snapshot
(According to The National Association of REALTORS® Profiles of Homebuyers)
• First-time buyers made up 33 percent of all home buyers, holding steady from last year’s 33 percent.
• The typical buyer was 47 years old this year, and the median household income for 2018 rose again this year to $93,200.
• Sixty-one percent of recent buyers were married couples, 17 percent were single females, nine percent were single males, and nine percent were unmarried couples.
• Twelve percent of home buyers purchased a multigenerational home, to take care of aging parents, because of children over the age of 18 moving back home, and for cost-savings.
• Ninety-one percent of recent home buyers identified as heterosexual, three percent as gay or lesbian, one percent as bisexual, and five percent preferred not to answer.
• Twenty percent of recent home buyers were veterans and three percent were active-duty service members.
• At 29 percent, the primary reason for purchasing a home was the desire to own a home of their own.
Student debt and housing market
A recent survey from Clever Real Estate, an online real estate marketplace, reports 48% of undergraduates are putting off buying a home because of their loans – delaying home ownership by an average of seven years. Contributing factors to this are student debt, a gig economy (independent workers being paid by the gig versus a salary or hourly wage), and influences of growing up in the recession.
“Americans agree that 28 is the ideal age to buy a home; however, the median college graduate with student debt doesn’t expect to be able to afford a home until age 35,” Clever writes. “In contrast, students with no student debt plan to buy a home by age 30. This delay has a significant impact on the housing market because college graduates want to buy homes.”
Forbes reports that student loan debt is now higher than ever with more than $1.5 Trillion in student loan debt. Student loan debt ranks higher than both credit card debt and auto loans, and is now the second highest debt with only mortgage loans ranking higher. Let’s take a closer look at these stats:
Student Loan Snapshot:
• Total Student Loan Debt: $1.56 trillion
• Total U.S. Borrowers with Student Loan Debt: 44.7 million
• Student Loan Delinquency or Default rate: 11.4% (90+ days delinquent)
Alternative ways to home ownership
Reade Pickert of Bloomberg states, “A nationwide shortage of affordable housing, coupled with lower mortgage rates, has stoked prices in cities from the coasts to the heartland. At the same time, student loans and other debts make it harder for Americans to save tens of thousands of dollars for a down payment, while tight lending standards can make getting a bank loan difficult for borrowers with less-than-stellar credit scores.” But this will not stop home ownership as buyers are now looking for alternative ways to homeownership like using gifts from family or friends for down payments, buying homes with roommates, and buying a fixer upper as a first-time home. New LendingTree research shows an overwhelming majority of homebuyers with student loan debt would consider purchasing a fixer-upper. These homes typically have lower price points when compared to similar properties that are move-in ready.
Despite student debt we still have a strong housing market, and buyers and potential buyers who believe in the American Dream and home ownership. According to TransUnion, at least 8.3 million first-time home buyers will enter the mortgage market between 2020 and 2022, due to low unemployment, record-low mortgage rates and rising wages. Senior Economist, George Ratiu, of Realtor.com predicts overall buyer demand will remain very robust, particularly at the entry level, in 2020. The largest population cohort in the country (those born in 1990) will turn 30 in 2020, accounting for 4.8 million millennials hitting the traditional peak home buying age. As a group, millennials (those born 1981-1997) will take more than half of all mortgages next year. For the first time ever, millennials’ share of mortgage originations will surpass 50 percent in the spring, outnumbering gen X and baby boomers combined. The last generation to take more than half of all purchase originations was gen X in 2013, just six years ago. Accordingly, other generations’ footprint will continue to contract, with gen X and baby boomers taking 32 and 17 percent of mortgage originations respectively. Only time will tell.
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• Bloomberg – https://www.bloomberg.com/news/articles/2019-11-08/young-homebuyers-vanish-from-u-s-as-median-purchasing-age-jumps
• Housingwire.com – https://www.housingwire.com/articles/the-median-age-of-homebuyers-is-now-47-how-did-that-happen/?
• Housingwire.com – https://www.housingwire.com/articles/49819-americas-debt-burdened-millennials-are-delaying-homeownership-by-7-years/
• Housingwire.com – https://www.housingwire.com/articles/49137-lendingtree-student-loan-debt-is-driving-millennials-to-buy-fixer-upper-homes/
• Transunion – https://newsroom.transunion.com/housing-market-to-receive-boost-as-number-of-first-time-homebuyers-expected-to-rise/
• Forbes – https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#1ddd927133fb
• LendingTree – https://www.lendingtree.com/home/mortgage/homebuyers-with-student-loan-debt-are-more-likely-to-purchase-a-fixer-upper/
• Realtor.com – https://www.realtor.com/research/2020-national-housing-forecast/
• National Association of REALTORS – https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers#homebuyers
• Clever Real Estate – https://listwithclever.com/real-estate-blog/millennial-home-buyer-report/
• RobChrisman.com – https://www.robchrisman.com/nov-22-cfo-recruiting-lo-jobs-processing-forecasting-application-tools-deep-dive-into-hecms/
• U.S. Census Bureau – https://www.census.gov/newsroom/press-releases/2019/cps-asec-geographic-mobility.html
• New York Times – https://www.nytimes.com/2019/11/20/us/american-workers-moving-states-.html
• Wall StreetJournal.com – https://www.wsj.com/articles/people-are-staying-in-their-homes-longera-big-reason-for-slower-sales-11572777001