Where Have All The Millennials Gone?
Do you love a good mystery? If you are like most people, once a riddle is proposed you can’t help but start setting the ol’ wheels a spinning – or, if you are of a more literate mindset, stimulate the little grey cells.
What has been engaging the wheels and brain matter in the saloons and salons I frequent is, where have all the Millennials gone? Or, as it is rephrased in the Real Estate world, why aren’t Millennials buying houses?
Just like the baby boomer who didn’t know he needed an answering machine, VCR, Facebook or cell phone until it was almost too late, I wasn’t even sure who these Millennials were, much less that they weren’t buying homes.
For any other cave dwellers out there the Millennials are not a new musical group but consists of the Generation Y. Why Y? Because they follow Generation X. Millennials are people who reach young adulthood around the year 2000.
In September, Fannie Mae released its opinion on “one of the biggest problems facing the housing industry.” The report said that Millennials have reasonable access to affordable housing but are not buying. Among the reasons: higher unemployment due to soft labor market, insufficient savings for downpayment, length of educational careers leading to high student loan debt, subpar median incomes and lifestyle preferences.
The severity of the situation was illustrated in a study by the National Association of Realtors, which recently mapped the median age of homebuyers across the country. In Colorado from 2003 to 2013 the median age increased by 10 years from 32 to 42 years old. Since Millennials represent the single largest share of any age group, they are critical to a healthy future Real Estate market.
Information appears to be one factor. Though there is no lack of information crossing the endless i-pad, notebook, pc and even the old dinosaur television screens, there seems to be very little information absorbed concerning something as basic as minimum downpayment options.
Recent polls indicate that most Millennials think they need a 20 percent downpayment to qualify for a mortgage, which means they may not be aware of the existence of low- or no-downpayment mortgage programs offered by Federal Agencies such as FHA and VA, Banks and state and county agencies.
Other causes could be more psychological. A post-crash headache from the meltdown of 2008 may have traumatized Millennials, who grew up as the housing industry was collapsing. Convincing them that buying is a good investment may be a challenge.
Other would-be buyers may perceive a barrier to owning because of having to pay taxes or pay for repairs — things that landlords take care of. Another hindrance cited is that Millennials don’t want to get locked down, fearing that if they want to move in five years, they may be stuck.
Previous generations had a good reason to buy a home. Boomers did it as an investment and because they were told renting was a waste. When Generation X was ready to buy, houses were seen as an asset with almost unlimited appreciation potential. Now the road forward can feel uncertain.
Like most problems and mysteries, things will sort themselves out in the end. The Y Generation will buy homes when they feel there is a value to them to do so. Housing prices, interest rates and loan terms will adjust so that people will be able to buy.
The real mystery now is that after Generation Y comes Z and we run out of letters. Then what?
Neil Funsch has been a mortgage broker for 18 years, the last four in Park Hill. He can be reached at 303-229-2684 or neil.funsch@gmail.com.