Millennials are coming of age as homebuyers, just as housing prices are climbing and a lack of homes in some markets is causing bidding wars.
CHICAGO — Millennials are finally starting to show interest in homeownership.
Weighed down by massive student debt and job struggles, the generation brutalized by the Great Recession has lacked both the money and the desire to buy homes. They’ve been a generation of renters.
But as millennials have entered their 30s, established themselves financially and started having families, they’ve gradually begun to show interest in homeownership, according to Fannie Mae economist Douglas Duncan.
To be sure, millennials still trail other generations in homebuying by a longshot. But they are making gains as they age.
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“They were hard hit by the economy, went back to college because they couldn’t find jobs and got a later start,” Duncan said. “They will start catching up.”
The trend comes as a relief to real-estate agents desperate to sell homes and economists worried that the economy would remain bogged down without enough first-time homebuyers. Typically, 20- and 30-somethings play an essential role in the economy and housing market. They become first-time homebuyers, filling their new homes with everything from appliances to yard equipment. Millennial home purchases also give older generations the chance to sell their own houses and move up.
Millennials are coming of age as homebuyers, though, just as housing prices are climbing and a lack of homes in some markets is causing bidding wars.
Russ Page and his fiancée, Jessica Doane, have experienced the rigors of the market in Chicago. Both now 28, they weren’t in a hurry to buy earlier as they tried to get careers on solid footing.
But as rents in the Chicago area climbed, they started asking themselves if they were wasting too much money on rent and they were tempted to move from a distant suburb closer to downtown Chicago. They recently found a home they wanted in the trendy Bucktown neighborhood — a sunny two-bedroom condo overlooking parkland.
Yet they lost it as many buyers competed for the same unit. The winning buyer offered $10,000 over the asking price.
“Jessica was pretty upset,” Page said. Still, he remains wary about overspending on anything he buys.
“I remember vividly the housing crash,” he said. “I was in college, and I watched my parents take a huge loss on their home. It was surreal.”
So despite his feeling of stability, with his job in sales and his fiancée’s as a quality-assurance supervisor, he wants to stay within a limited budget.
Surveys of millennials show his attitude is widely held. They are a practical generation that watched parents struggle to hold onto jobs and homes as unemployment soared to 10 percent and housing prices crashed 30 percent in the Great Recession.
But Duncan, who has been tracking today’s millennials as they have been aging, is picking up on some solid trends in millennial homebuying. He has seen distinct increases in buying as millennials have moved from their early 20s to late 20s and into their 30s. For example, as he followed a demographic group of people ages 28 to 29, he found that by the time the individuals were 30 to 31, they increased their homebuying by 2.8 percent.
Millennials seem to be doing at a later age what their parents’ generation did when younger, Duncan said. Millennials have delayed marriage and have waited for several years for the job market and pay to improve. But as incomes rise and they marry and get ready for children, they are less interested in cramming into studio apartments in high-demand areas, and start searching for homes or condos they can afford to buy.
However, an increase in home prices is an issue for young adults because income growth still is weak, Duncan said. Nationally, housing prices have been growing at four times the rate of incomes.
With the combination of rising prices and the impact of higher interest rates on mortgages, Duncan said the situation will price first-time buyers out of the market.
Still, many millennials say they will not be pushed by concerns over rising prices to move faster than they should. Before the housing crash, which started slowly but took hold in 2008, people had been trying to rush ahead of fast-rising prices to buy while they thought they could. The overinflated market led to the crash.
Now many millennials have learned from the past and are determined to have their finances in solid condition before making a move.
“Have you seen the interest rates on student loans?” asked Leksi Culafic, a 27-year-old Chicago lawyer with student loans. She lived at home for a year after law school because “I wanted to aggressively pay down the loans,” she said. Now she lives in an apartment near downtown and wants to buy a home eventually, but she’s determined to get rid of the student loans first.
“Owning a home is a goal,” she said. She’s using apps to explore the possibility of buying a home or two-flat, but her intention is to pay off her law-school loans over the next 1½ years before making a purchase.