As median home prices nationwide hit the largest annual drop in more than a decade, first-time home buyers, especially millennials, are still hurting. Is this the end of the American dream, or will there be a boost in Millennial home buying in the near future?
Good news for those looking to get into the real estate market. Nationwide, prices have dropped 3.3% since this time last year, accounting for the largest single-year decline in over 10 years.
However, for first time home buyers, and renters looking to enter the market, things aren’t as rosy as they appear. The recent fall in home prices is mostly due to what’s happening in the upper and middle price tiers of homes. Homes in the lower price tier, considered entry level homes, have not come down in value. As a matter of fact, many have actually increased in value since last year.
This means that the most affordable homes on the market are more expensive even after a year of significantly higher mortgage rates. On top of this, buyers are still facing plenty of competition for the limited inventory of home listings. There is still a huge problem with inventory. With many homeowners locked into sweet, once in a lifetime interest rates, there is a shortage of willing sellers. Can you really blame a homeowner for not wanting to give up a sub 3% loan for a 6 – 7% loan? Yeah, neither can I. But, their unwillingness to join the market is making it really tough on buyers.
You can see this in the overall sentiment of Millennials, who are the largest group of individuals entering the real estate market for the first time. A recent poll conducted by Zillow shows that 57% of Millennial non homeowners (aged 27 – 42 years old), believe that the only way to get into a home right now is to win the lottery. That is bleak, and kind of depressing, but as a fellow Millennial, I feel the pain, and I can completely understand.
Home prices are higher than ever. Wages have not kept up with inflation. And increasing rents and living costs have made it harder than ever to save up for any sort of down-payment.
The last couple of years were a gift, but at the same time, they were a curse. Interest rates were at historic lows, opening up home ownership to many individuals who didn’t think it possible. However, with that influx of new buyers was a huge increase in competition. Not only that, but cash flush Baby Boomers were coming in and buying up homes as rentals. Many potential buyers placed offer after offer after offer on homes, and never actually got one. After a time, this had to have taken a huge psychological toll. Especially now that interest rates have gone up, and prices have continued to rise. The dream was there, but it was just out of reach, and now it seems like it’s gone forever. This defeatist attitude that many Millennials have right now, is completely understandable, and completely justified.
If you are watching this video, you probably participated in that insanity, or know somebody that did. My only advice is to not give up hope. The real estate market may appear hopeless, but it is not necessarily so. What I do know is that many individuals are in a much better position than they actually think they are.
Before you completely give up and surrender to a life of renting, do this one thing for me. Call up a Real Estate Agent, it doesn’t have to be me (although I would love to talk to you), or a call up a Mortgage Lender, I can give you the name of a great guy. Talk to them about your situation, and see what your options are. You’d be amazed at home many times someone who never thought they could afford a home, was able to purchase one, just because they made that call. Now look, let’s be realistic. I can’t guarantee anything, perhaps you’re right about your situation. However, it costs nothing to call except a little bit of your time, so why not?