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Rising Rental Prices Pushing Millennials to Buy

May 7, 2015

Home values and real estate prices are hard to predict. However, one thing is becoming very clear: millennials will have a huge impact on home prices. According to a recent report from the National Association of REALTORS (NAR), the millennial generation (those born between 1980 and 1999) comprised the largest population of homebuyers across the United States in 2014. This is the second year in a row millennials have proven to be key in driving the real estate market. NAR’s data revealed that 18-to-34-year-olds make up roughly 32% of the market. The median age for millennials who bought a home in 2014 was 29 years old last year. 

This growing population of homebuyers represents the future of the real estate industry for brokers. Selling to millennials requires a much different approach than marketing to previous generations, but Realtors can’t afford to miss out on this new crop of homebuyers:

“They are going to be larger than even the baby boomers. There are more of them,” says Diane Cummins, past president of the Hudson Gateway Association of REALTORS and manager of Coldwell Banker in Bedford, NY. “When and if they become homebuyers, it is going to be a remarkable clump of business that comes our way. They’re really starting to emerge.”

Members of this younger generation, who have grown up with the Internet, are very tech-savvy, and generally come to brokers with most of their research already done. They know what they want, and they are driven by technology, but they still rely on experienced agents – more so than any other generation of buyers. Reaching millennials through social media, geo-targeting, and mobile technology can be very effective when trying to make that first point of contact. After that, Cummins says it’s not worth wasting time explaining different types of homes or touring different communities – they’ve probably already done that virtually, and they know exactly what they are looking for. This new cut-to-the-chase style of homebuying seems to be an efficient means of business in the real estate world:

“When it comes to the art of getting it done, they want to use a REALTOR,” says Cummins. “They realize that this is not their job.”

Many of the young adults who are purchasing homes are doing so because their rents have increased so much that it just makes more financial sense to buy. The NAR survey revealed some interesting statistics regarding millennial buyers:

– Their median income was $76,900, up from $73,600 in 2013

– 97% financed their purchase, compared to the high majority of buyers who have paid in cash over the last few years

– The median down payment was 7%

– 25% of millennial buyers were gifted money to aid them in their first home purchase

New Federal Housing Finance Agency policies and mortgage insurance rates will incentivize young buyers even more in the next year. “The new low-down payment mortgage program will safely serve creditworthy borrowers who lack the resources for substantial down payments plus closing costs while mitigating risk with strong underwriting,” says Chris Polychron, president of NAR. 

For more information on making the switch from renting to owning, contact the experienced REALTORS at Hilton Head Island Real Estate Brokers today. Call 843-785-8006 or fill out our easy contact form.