It appears that Millennials are finally beginning to enter the housing market. In a recent report, CoreLogic looked at the annual net change in household formations over the last decade (see graph below):
It appears this is the year that Millennials are finally moving out of their parents’ basements and finding a place of their own. And they are not all renting
According to the National Association of Realtors’ latest Existing Home Sales Report, the percentage of first–time buyers rebounded to 32 percent in August, up from 28 percent in July and matching the highest share of the year set in May.
What has kept the others from buying a home?
Recent surveys have revealed that there are major misunderstandings as to what is required to get a mortgage in today’s lending environment. Many Americans believe you need at least a 780 FICO score and a 20% down payment.
In reality, neither is required. Here are the mortgage statistics (FICO score, % of down payment, mortgage interest rate and debt-to-income ratio) for Millennials who have completed the mortgage process in the first half of this year according to realtor.com:
More and more Millennials are beginning to enter the housing market. As they begin to better understand the mortgage process, we will see even greater numbers buying a home.
Corrin says: “As this article shows, the millennial population has been somewhat absent from the real estate market in the past 8-9 years and there have been a number of contributing factors. I know I have personally seen many millennials intimated by the real estate market and it’s easy to see why. Years of negative press regarding depreciating home values, large number of foreclosures, and a general uncertainty about the “health” of our real estate market and the economy have kept this population cautious to enter into home buying. Another factor is a large number of these millennials have faced an extremely tough and competitive job market while exiting college in the past 8-9 years. While we are now seeing the economy improve these millennials are feeling secure in their careers and have taken the time to educate themselves about the buying process. They have their credit scores in tact, down payment money saved, and have spent time researching online. We are finally seeing this population really enter the market and it is creating an trickle up effect. These first time home buyers are buying homes of the population who are ready to make their first or second move-up purchase. Making this population also able to move into the next home of their dreams!”