It is no secret that millennials are less active in the housing market than the generations before them, but it looks like the tide might be changing in that regard as of late. Young people have largely stayed out of the process of owning a home for many potential reasons: the recent recession, underemployment or unemployment, overwhelm from student loan payments, or the perception that they would not qualify for loans.
According to new research from the National Association of Realtors, however, it looks like first-time homebuyers have upped their share of the purchase market in recent months. This last May, younger buyers made up 32 percent of home sales, which is an increase of several percent from the month before and April of 2014.
One of the prime reasons that millennials hold so much appeal for lenders is because if qualified properly, this age group could significantly boost the sale market. Prior to the collapse of the housing market in 2007, first-time homebuyers made up 40 percent of the market. While this is obviously quite a big difference, the association conducting the report believes that millennials could boost home sales by 5 percent on their own, if they chose to engage in the market.
What’s Behind the Decrease?
There are not many studies with clear outcomes about why this age group has avoided the process of buying a home, but there are plenty of theories about what’s keeping them out. The news has shared plenty of information about the struggling home market, and the credit crunch has had real impacts for this generation overall. It’s been harder to get loans for anything, especially for a younger person burdened by student loan debt already.
Banks have tried to play it safe after the recession by tightening up on mortgage lending. Subprime loans disappeared after the market crash, but traditional homebuyers felt the impacts of the downturn too as banks bumped both credit standards and income requirements necessary for qualification.
Even if there are indications that things are looking up for those wanting to buy a home, that message has not been clearly translated to millennials themselves. Many who are currently renters ultimately want to own a home, but feel it is out of their reach or that they would be denied for an affordable loan.
What’s clear is that some kind of change needs to happen in order to engage this all-important group of potential purchasers. This is not to say that the entire burden falls on lenders, either. It is possible that educational efforts by the government could be helpful for showing borrowers that they do qualify for home loans. In conjunction with better awareness about the benefits of owning a home, it is possible that millennials could finally move forward with the purchase of their first home. No matter what the solution is, the problem is definitely on the radar of many throughout the industry.