Millennials holding off on first home
The economy is improving, hiring is gaining strength and average hourly wages are moving upward, which means potential homebuyers are beginning to feel better about taking on a mortgage. However, it's a different story for millennials who are not quite ready to pull the trigger.
"A lot of millennials are graduating from college and entering the workforce, but over the past few years, they have entered a very challenging labor market. They haven't seen their wages go up much and student loan debt is also having an impact," said Adam DeSanctis, economic issues media manager with the National Association of Realtors.
And while most millennials aren't in a position where they can afford to purchase a home, most are interested in becoming homeowners at some point. According to a survey released in November 2014 by LendingTree, only 4.4 percent of non-homeowner millennials said they weren't interested in owning a home.
Nationwide, just 49 percent of homes are within reach of the median-income millennial household, compared with 59 percent for the median household regardless of age, according to a report released in November 2014 by Trulia. In 45 of the 100 largest metro areas, the majority of homes for sale are beyond the reach of the typical millennial household. Those areas include not only expensive coastal markets such as Los Angeles and Honolulu, but also such places as Newark, Tucson, and Tacoma, Washington. Austin and Oakland are among the 10 least affordable housing markets for millennials.
About 44 percent of college-educated millennials own a home, according to the LendingTree survey.
The top cities for opportunities for millennials in terms of finding jobs are in some of the most costly areas to buy a home or even to rent. They have big expenses and their income is going up significantly, so saving for a down payment is very difficult.
"I think they just need some time," Desanctis said. "The average median age of first-time buyers remains between 29 to 31 years of age. It remains to be seen going forward if that will go up a little bit, but the economy is improving, the job market is picking up another gear - so as millennials settle down, get married and have kids, they're going to want homes."
Meanwhile, mortgage rates are expected to go up in 2015, so affordability will remain a challenge.
When LendingTree asked non-homeowners what would allow them to consider purchasing their first home, most cited monetary factors:
- 67.4 percent said they would need a higher income or salary;
- 33.3 percent want to wait until they move to a more preferred area;
- 28.7 percent said they would need to pay off their student debt;
- 25.7 percent want to travel or spend money on other things first before purchasing a home;
- 21.9 percent said they would need to pay off other long-term debt.