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The Millennial…Homeowner?

  |  Homecare & Lifestyle

So maybe you aren’t necessarily a member of this generation, but chances are you at least know a millennial (anyone aged 19-35 in 2016), and the chances are high that they’re mulling over the decision to continue renting, or to enter the fray and buy a home. It might seem odd to older generations, but economists have actually been wrestling with this for some time as rents and average home prices continue to increase while wages remain the same. There are, however some great reasons to own that are both satisfying and pragmatic. If you or someone you know is currently wondering about the same thing, this article is worth reading.

Besides the increasing cost of homes spurred by low inventory, a trend that’s especially true in the Pacific Northwest area, many millennials feel burned by their student debt, a long term contract that they can now see stretching out in front of them, something that generates a reluctance to sign up for another long term contract like a mortgage. According to the Huffington Post, a household income of just over $70.5k is needed to buy a home in Portland. In Bend, where the average selling price of a home is currently $443, 204 compared to $473,700 in the Portland Metro area, the necessary salary would look more like $66,016.

Don’t count the millennials out of the game yet, though.

Despite those hurdles, millennials still account for 35% of home buyers – more than boomers – and 88% still consider homeownership a part of the American Dream. With 91% of the 87 million millennials in America claiming that homeownership is something they plan on, it seems reasonable to plan for a future wave of millennial home buyers (RISMedia).

If you or a millennial you know are in that 91%, what are some steps that a millennial seeking to own their home can take to help put them on track? Well, here are some tips from Hasson Company Managing Principal Brokers Andrew Misk and Ward Spears.

The first practical step you can take isn’t difficult, but it’s not something a lot of young people do – build your credit. Open a credit account, and begin with a manageable amount that you can move through the account. It can be tempting, but don’t take this account into debt, and always make your payments on time. This can be started at any time, so the sooner the better – since it will take 6-12 months of on time payments to build up the credit needed for a mortgage.

Next up, saving for a down payment.

If you’re wanting to buy a home, that means budgeting and putting some cash away each month to save up for your initial down payment. While being told to  budget your expenditures is important, it’s more useful that you understand what you’re saving for when it comes to purchasing a home. The conventional wisdom is that you save enough that you can put 20% of the home’s cost towards the down payment. However, it is possible to pay 5% (or even less) instead. Know though, that this option will add the cost of mortgage insurance, which adds 0.5-1% of the annual mortgage premium. This cost is broken into monthly payments (so it would be 1/12th of .5-1% each month) and can be quite manageable.

Some young homebuyers purchase their home with the help of a gift-fund from a parent or guardian. Our last quick tip is to check with your lender, to ensure that the funds can be used, and that there is no “seasoning” period in which the funds must stay available in the account long enough to be verified.

That’s all great, but what about those unconvinced that homeownership is superior to renting? After all, with renting there’s the flexibility, the lack of maintenance costs, the amenities, etc…

Well, the best thing about owning a home that you’ve thought through carefully and inspected thoroughly ahead of purchase, is that there are fewer unknowns. Yes, there will be maintenance and improvements needed over the years, but if you’ve thought it through, they’ll be less surprising than a sudden rent hike, and can be better mitigated than could a noisy new neighbor across the hall.

Besides being more in control of your own environment, a mortgage can actually be easier to manage than can rent. Not only is it knowable and fixed over time, but clients of both Ward and Andrew have been surprised to find themselves spending less per month on a mortgage than they would’ve payed on rent.

No matter what your situation, deciding between renting and owning is always complicated. It’s essential to factor in your lifestyle needs, and to keep your wants and needs in perspective, all while thinking about your next 5 years of life. It can naturally be overwhelming, and surprisingly introspective, as the elements of your life get put into perspective by what’s affordable.

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About the Author

Lynae Forbes

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