Generation Y has been known in the real estate industry as a population wary of homebuying. But studies are showing that more millennials are becoming first time home buyers.
Millennials begin to buy
According to the National Association of Realtors’ Home Buyer and Seller Generational Trends report for 2015, Generation Y represented almost one-third of all homebuyers, , the largest segment that year. Among first time home buyers, millennials accounted for a little more than two-thirds.
The NAR also found that millennials who buy homes typically do so because of a desire to become a homeowner, rather than to own investment properties, and are generally upsizing in the process.
“There are many financial benefits of becoming a homeowner.”
There are many reasons a young adult would want to become a homeowner. Lawrence Yun, the NAR’s chief economist, explained in a press release that many understand the financial benefits of buying a home.
“Over 80 percent of millennial and Gen X buyers consider their home purchase a good financial investment, and the desire to own a home of their own was the top reason given by millennials for their purchase,” Yun iterated. “Fixed monthly payments and the long-term financial stability homeownership can provide are attractive to young adults despite them witnessing the housing downturn and subsequent slow recovery in the early years of their adulthood.”
If a millennial is planning on staying in one location for at least a few years, there are plenty of advantages to buying a home. For example, U.S. News & World Report explained that mortgage payments are a better investment than a monthly rent check. While rent money goes straight to a landlord and only represents one month of housing, every mortgage payment represents more equity in a home that the loan holder will eventually be able to capitalize on. Those payments are long-term investments that can have benefits for future life events, like retirement.
Owning a home can also help out during tax season. Mortgage interest payments are tax deductible. Plus, if the home increases in value by less than $250,000 and it was used as a primary residence for at least two years, the owner may not have to pay a capital gains tax when it’s time to sell.
Buying a home with a good resale value can also benefit the homeowner later on, when he or she decides to relocate. Resale value can increase over the course of homeownership by making improvements on the home. A study by Houzz found that millennials are making these improvements just as frequently as older generations.
“While still a small group, Millennial homeowners are just as active as older generations when it comes to renovating and decorating,” Nino Sitchinava, principal economist at Houzz, said. “Because of delayed homeownership, we have historically known very little about their preferences when it comes to their home updates. However our unprecedented data show that Millennial views on resale value, energy efficiency, healthy homes, and other factors are similar to those of older generations.”
U.S. News & World Report stated that 62 percent of millennial homeowners have renovated their homes, while 58 percent have made repairs. Renovations can be expensive, but millennials have made some improvements more affordable by learning to accomplish tasks themselves, rather than hiring a professional. Refinancing a mortgage is another way to obtain the money needed to upgrade a home.
Buying a home is a positive investment for many millennials, but there are some things prospective homebuyers should keep in mind. When saving for a home, aim to put as much as you can toward the down payment. This will help in lowering mortgage payments and can also help prevent the mortgage from going underwater, which means the home is worth less than the amount owed. When saving, it’s also a good idea to keep in mind that homeownership will come with unexpected costs, like necessary improvements. Consider looking into down payment assistance programs through lenders like Lenox/WesLend Financial, which can also help with closing costs and other upfront fees at the time of purchase.
For more information about becoming a first time home owner, or about refinancing a home for the first time, contact Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.