There's an awful lot of negativity associated with the term 'millennial' for a variety of reasons. Older generations feel as though millennials, who now make up the largest group in the United States, aren’t doing their part to further national interests.
One such area in which baby boomers and other generations believe millennials, or Generation Y, aren’t pulling their weight is in regards to home ownership, as despite buying a large percentage of homes every year, millennials aren’t purchasing at the same rate as generations in the past.
There are reasons for this decline in home ownership, however, as things seem to be stacked against this generation as they attempt to navigate the current financial landscape and prevent themselves from making the same mistakes that led to the financial crisis of 2008.
As we’ll see, it’s not that millennials don’t want to buy homes, it’s that they are far more selective and want to ensure they’re making the right decision, rather than blindly making the purchase and hoping for the best.
The Desire is There
The truth is that millennials do, in fact, want to buy homes, but there are some unique obstacles in their way that make home ownership more difficult than it was for previous generations. Recent surveys suggest that 86% of people from generation Y want to purchase a home and 35% of these people plan to do so in the next year. An additional 57% of millennials believe they will buy their first home within two years, as well.
There is also the fact that millennials are 66% of the country's first-time home buyers, and purchase 34% of homes overall. This percentage equates to two million homes sold to millennials annually, which is a significant number in the grand scheme of things.
Despite these numbers, however, millennials still aren't buying homes as rapidly as previous generations, but there are some very valid reasons for this slowdown, which we'll cover next.
Why Aren't They Buying?
Perhaps the most vital reason why millennials aren't buying homes in South County is that they can't find a home that they want. Home inventory throughout the country is relatively low, which drives prices up and makes it more difficult to find the ideal residence to purchase. After all, you can't buy a home unless the owner puts it up for sale and since baby boomers are holding their properties, rather than selling them and downsizing, it can be challenging to find the perfect home.
Naturally, money is another reason for the reduced home-sale numbers, as buying a home is often prohibitively expensive. It is estimated that 36% of millennials can't afford the down payment, and as many as 44% have no money put away for a down payment whatsoever. These numbers mean that millennials aren't making enough money to pay for their current living expenses and save cash to put toward a home.
The current rental market is a reason for the lack of extra income for millennials, as they end up paying more than they can afford for an apartment or house rental, leaving them living paycheck to paycheck. If you're struggling to cover your current living expenses, coming up with an extra $20,000 or more to satisfy a down payment can seem like an impossible task, which is where millennials are finding themselves today.
There's also the issue of credit, as 26% of millennials have a poor credit history, 43% have subprime credit scores, and as many as 13% can't keep up with their existing debt load. There's another 9% of millennials who are struggling with their student loans, and that number jumps considerably when talking about older millennials who have attended graduate school.
Qualifying for a mortgage is almost impossible if you're not making enough money or have substantial debt on the books, and that is a reason why 25% of millennials have not yet bought a home. Other common reasons for not making this purchase include the prohibitive cost of real estate and the increasing mortgage rates put out by the banks.
Home Values in South County
The numbers in South County are a mixed bag because the median home value is $361,300, but the median list price is $439,000. This difference is an excellent example of what is causing difficulties for millennials, as lower-priced homes simply aren't hitting the market as frequently as before. Home values are up 9% in May 2018 from the same time last year, and the one-year forecast suggests values could increase another 7.6% in the coming year.
Something to keep in mind when buying a home in South County, however, is that the value of a home is highly dependent on its location. Homes in Narragansett, for example, have a median value of $437,100, while neighboring Charlestown has a median value of $349,400. South Kingstown and Westerly also have median values far below Narragansett, providing better bang for your buck for millennials.
Ways to Afford a Home
Millennials have a good idea of what they're looking for in a home before starting their search, but, unlike past generations, are more willing to give up several features to afford a home in the right neighborhood. The statistics suggest that as many as 84% of millennials would buy a place without a garage or interior updates, despite wanting those features, just to be able to afford the home.
Younger buyers are also more likely to buy a home in a less than desirable location, such as an area with a higher crime rate, than their older counterparts. This trend is leading to gentrification in some areas, as millennials are moving in and, in turn, making these areas more desirable over time.
If you’re a millennial who is serious about buying a home, consider less expensive neighborhoods or homes that don’t meet your ideal profile as starter homes, before moving into your dream home once you’ve built some equity.
Getting Millennials Involved in Real Estate
The numbers show that millennials are interested in buying homes, but some factors are making it more difficult. These factors aren’t deal breakers by any means, however, as you can find a home within your price range on the south coast of Rhode Island if you come up with a house profile and wait for a match.
In the end, you’ll be glad that you took the time to consider locations throughout southern Rhode Island and even into the part of Connecticut because opening yourself up to the possibility of living in other towns gives you a better chance of becoming a happy homeowner.