Forbes Magazine named 2015 the "Year of the Millennial Customer," claiming, “millennials are not only the largest generation in U.S. and world history, they’re on the cusp of commanding the largest wallet power as well. It’s estimated they’ll be spending $200 billion annually by 2017 and $10 trillion over their lifetimes as consumers, in the U.S. alone.” Forbes prizes this generation so much that they named 2016 the Year of the Millennial Customer as well.
And why shouldn't they? According to a March 2015 report from the National Association of Realtors, millennials represent 32% of the real estate market, and the 2015 TD Bank Mortgage Service Index reports that, within the next year, 50% of millennials will say they are either “extremely” or “very” likely to buy a house.
If you're a millennial, although you've already overtaken baby boomers as the largest generation, you've also got a few more challenges. For the millennial generation, large student loan debt seems to be a prerequisite, and since the trend is for marriage and family to be delayed by a decade or so, your first home purchase is something you may be doing on your own. As you go down this road, I'd like to offer you a few tips to make the process easier for you.
- Pay Down the Number – While student loans are almost a given, be sure that you're keeping up with credit cards, car payments, and other loans. If it's manageable, pay off the smaller ones completely, but make sure you don't miss any payments. You're going to be applying to borrow money, so you've got to prove you can handle it.
- Create a Realistic Budget and Start Saving – A good place to start is with the Affordability Calculator offered by Zillow. However, knowing what you make isn't quite enough. Look at your current spending habits and notice where your money is going. Your monthly payments (including taxes and homeowners insurance) could be up to 30% of your monthly income, so be sure to re-prioritize your spending if you need to. Remember that closing costs are going to be 2-5% of the purchase price, but if you don't have the cash on hand to cover them, you can negotiate for the seller to pay them with a small increase to the purchase price. Getting into the habit of putting money into a savings account when you get paid is a good trait to pick up now.
- Don't Assume You Can't Afford It – While it may seem daunting, purchasing a home is possible for almost anyone. Even if you don't have the 20% down payment, first-time buyers can sometimes purchase with as little as 5% down through loan options such as those from the FHA (Federal Housing Authority). Besides, rent these days is generally about as much, if not more, than what your monthly payments are going to be, so the real question isn't whether or not you can afford to buy a home, but whether or not you can afford not to.
- Location, Location, Location – This is of course a real estate axiom, but it's a really important one. Be sure to look in neighborhoods that are going to work for you regarding your job, school, and/or your family situation. Whether this is a starter home or one you're going to be in for a while, a good location goes a long way toward preserving your happiness while you're there.
- Think of the Possibilities – Since many millennials aren't looking to settle down with a family right away, this first home offers a variety of opportunities. Some rent out extra rooms to boarders or for Airbnb, some like to remodel and flip, and some like to experiment with co-housing scenarios. What might work for you?
- Get a Realtor– The best part about working with a Realtor in the home-buying process is that it doesn't really cost you anything, and you can get a lot of guidance on the pitfalls of home-buying, as well as referrals for contractors, plumbers, and other services that you might need. While buying a home for the first time is a great leap toward independence, you don't have to go it alone.
Whether or not it's your first time buying a home, REALTOR® Julian Yates exemplifies a comprehensive resource in the buying and selling of properties in the Sarasota area. Contact Julian today to begin an ideal real estate experience.
Sarasota Area Real Estate Specialist