With the Millennial generation coming of age, it is surprising to find the rate of home-ownership is falling near a historic low. The largest generation in U.S. history, Millennials (born between 1981-1997) are currently ages 36-20. This is a vast range; however, peak home-buying years fall between 25-45 year olds - which is in fact the majority of Millennials.
Why aren't Millennials buying homes?
- Economic challenges: The Great Recession was less than 10 years ago. While the housing market has significantly recovered, Millennials were critically hit when graduating college and entering the workforce. Financial stability remains a challenge, especially in order to build a substantial savings for down payment. Student debt, along with the high cost of living in cities with the best job opportunities, does not allow for much room to save money.
- Lifestyle changes: Millennials don't adhere to the same "married with kids" aspiration that previous generations made standard. Those who do follow that path settle down much later than before - closer to their 30s. Buying a home can feel intimidating or irrelevant while trying to figure out the basic factors of one's life plan.
- Lack of affordable housing: Not only is the current lack of inventory driving prices up, but also available developments fail to meet first-time homebuyer and trade-up needs. Bidding wars are extremely common in this market when a rare affordable listing does appear.
Why should Millennials be investing in real estate?
The average cost for a studio apartment in Atlanta is $1,458 per month. You could be paying less than that to own a home! (Calculate mortgage here) The fact is real estate prices will continue to rise. The longer Millennials wait to purchase their first home, the greater price they pay by missing out on a solid investment.
Urban renewal in the city provides opportunities for Millennials to affordably buy in up-and-coming areas such as Inman Park, Grant Park, Cabbagetown, East Atlanta, and more. Smyrna and Marietta are also attractive options for Millennials with increased development around East Cobb for work and play.
The Atlanta Regional Commission expects the city's population to grow by 2.5 million people by 2040. With a booming economy, Atlanta's job opportunities continue to bring more transplants. The future population of 8 million people will all need housing - and that will come at a steep price.
How can Millennials overcome these challenges?
- Set realistic expectations for your starter home. While luxury apartments have made Millennials accustomed to new construction city-living, your first home may come with a few compromises. For first-time homebuyers, the perfect location at the right price may be an older home that need some renovating. On the other hand, a move-in-ready home could mean a longer commute from outside the perimeter. Condominiums can offer affordable options for better condition and location while sacrificing square footage.
- Get serious about saving. If you're not currently saving for a home, this means making a few sacrifices when it comes to your purchases in order to get your savings to a good place. Actively work on your financial responsibility while taking steps to improve your credit score. "Boomerangs" are commonly moving back in with their parents after college to avoid skyrocketing rent in Atlanta - which can be a strong method to grow savings.
- Get creative financially. Consider asking a family member for help with your down payment or an FHA loan which offers as little as 3.5-5% down. If you can purchase a home with a spare bedroom, consider renting to a roommate or Airbnb for extra profit to pay off your mortgage.
While it can be tough saving up money or facing an uncertain future, it's worthwhile to invest in real estate early for maximum payoff. Don't be afraid to make the commitment to a home - even if your job, relationship status, or future plans are not yet set. Your apartment rental may be a convenient lifestyle choice, but it will never pay itself off like the profit from even two years of home-ownership.