What’s in the Minds of Potential First Time Home buyers?
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Real estate experts all over the country are crossing their fingers, hoping that 2013 will be the year of the first time home buyer. They say first time buyers are crucial to getting the nation’s housing market out of the doldrums and into a full-fledged recovery. It’s not a pie-in-the-sky wish, though. According to a recent study, 90% of millennial-generation renters (or, those between the ages of 18 and 34) plan to buy a home sometime in the next two years. If that sounds like a slightly-inflated statistic, consider what rent prices have done over the last few years. As the housing market got worse and worse (and more and more young people were terrified to invest in it), landlords took full advantage – by raising rents to astronomical prices. In many cities, it is actually cheaper to buy than it is to rent! So now, with mortgage rates sitting at record-low levels, the housing market starting to show signs of life, and rent prices showing no signs of decreasing anytime soon, millennials are starting to give home ownership a second thought.
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But is that second thought out of necessity or desire? What’s going on in those millennial minds right now? There has been some turmoil in those minds – at least, according to a recent study, which found that people in their 30’s saw their wealth diminish more than any other age group during the recession. So, in order to buy their first home, those people would have to do quite a bit of rebuilding in the financial department before they can even consider going house-hunting. A lot of millenials would probably just be happy with a space to call their own, though! Throughout the recession, studies showed that nearly one-third of 20-somethings wound up moving back in with Mom and Dad, thanks to high unemployment, rising student debt, and lower entry-level salaries. Unfortunately, under-employment is still a big problem for the millennial-generation. Decades ago, the same 20- and 30-somethings that would have been out buying homes for the first time are struggling with part-time jobs or with jobs that are far below their level of education. (In fact, underemployment was a big problem for all age groups during the recession. From the third quarter of 2011 to the second quarter of 2012, underemployment was estimated at over 15%.) Despite all of the adversity thrown the millennial generation’s way, though, they still dream of being homeowners.
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In fact, according to a recent study, 72% of millennials still believe that owning a home is part of the American dream. But if they’re going to buy, they had better do it sooner rather than later. After all, prices have already started to inch higher. And, while mortgage rates have been breaking new record lows all year long, they’re not going to do that forever. Remember, inventory is still very low around the country – but as interest has started to get a little higher, there have actually been bidding wars for homes in some places. Odds are millennials don’t have the cash (or the stomachs!) to deal with a situation like that, at least, not for their first home purchase. Not after everything they’ve already gone through. Bottom line – the “perfect storm” of deals isn’t going to last indefinitely, so millennials are going to have to decide whether they’re in or out.
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