Millennials are the largest generational group in US history. This year, the largest section of Millennials will turn age 30, entering what many consider to be “prime homeownership years.” So how is the pandemic impacting these potential home buyers? Two recent studies have addressed this topic.
The first, by First American economist Mark Fleming is more optimistic than the second. Fleming states that the pandemic has delayed, but not denied, homeownership for Millennials. He notes that household formation is a key driver of home demand, and that the Millennial generation is making lifestyle decisions that “will continue to support potential homeownership demand in the years ahead.” He further states that Millennials “may fuel a ‘roaring 20’s’ of homeownership demand.” As a loan officer, I love optimism in the housing market!
On a less optimistic note, a realtor.com report stated that pandemic-related unemployment could further delay Millennials’ homeownership dreams. It expresses concern that unemployed potential homebuyers will live from their savings. And it could take them years to recoup their savings once the go back to work. The article then references how a 10% down payment on a $320,000 home (the median list price of a US home in April), is $32,000. Ultimately, it can take people months, if not years to save tens of thousands of dollars for a down payment.
Here’s the good news related to down payments – a 10% down payment is not required. Many home buyers obtain conventional loans with only a 5% down payment – even 3% down if they are willing to pay a higher interest rate. And there are income-based conventional loan programs that offer discounted interest rates and mortgage insurance for a 3% down payment – for those buyers who qualify. Home buyers can obtain 3.5% down FHA loans. And military veterans can buy a home with a zero down VA loan.
While obtaining a mortgage with a less than 20% down payment requires paying for mortgage insurance (except for VA loans), my opinion is that paying the mortgage insurance to buy a house sooner is often better than waiting and paying rent. As long as home prices continue appreciating, the homeowner will likely build wealth even if they have to pay the mortgage insurance. And in my opinion, growing wealth is superior to expense only home rental payments.
Are you or someone you know a Millennial wanting to buy a home in Georgia? I would love to help. We can explore low down payment and other options to help you buy a home (and start growing your wealth) sooner rather than later. Give me a call and let’s get started.
