Millennials are no longer children. With the youngest millennials now reaching their mid-twenties, these ‘90s kids are now young professionals spearheading their own futures. And with a global purchasing power of $1.4 trillion, $600 billion coming from millennials in the United States, it’s no surprise that our generation is making a dent in consumer trends in various industries – including real estate.
Millennials have been the largest share of home buyers in the market since 2014. And in 2020, it’s expected that they will take around 50% of the market in the United States. So, while millennials are buying their first homes much later in life than their parents were, it’s clear that they’re gaining the income to start establishing their own roots. And here’s what they need to know.
Cheap Houses Aren’t Cheap
Buyer beware – even for houses. Like a lot of everyday products, a high price doesn’t usually mean high quality. But at the same time, if some things are too good to be true, then it probably is. Take, for example, houses in Detroit that you can buy for $1. That isn’t a typo – these houses cost one dollar.
Considering that the median price of a house in the United States is $200,000, it might seem like a steal. Unfortunately, if you buy one of these houses, it’s highly likely that you’re the one getting robbed. Detroit’s economy has such a bad reputation that around 78,000 of its residential properties are abandoned. For one dollar, you’re getting a house that’s unlivable, has been looted of its pipes, plumbing, aluminum, or anything that’s worth selling.
What you’re most likely buying for a dollar is a completely rundown home that you’re better off tearing down than trying to renovate it. And even if you buy the home for a dollar, the property taxes applied to it are based as if the house is still worth $60,000. This means even if you don’t do anything with that property and leave it in its gutted state, you still owe between $2,000 to 3,000 in property taxes. In some areas, neighborhoods are so far gone that even if you do buy a cheap house and plan on repairing it, you won’t be allowed to do so.
While this only reflects a portion of Detroit, it’s a lesson many first-time buyers can take in terms of knowing the worth of property and its hidden costs. You can keep a small budget, but don’t be cheap if you’re looking for quality.
Balancing Student Loans, Debt, and Housing Loans
Did you know that millennials show greater interest in buying properties than their parents? One of the reasons why millennials are so slow to buy houses is because of financial challenges. A millennial in the United States who took out student loans has an average of $32,731 in college debt. This, plus the fact that wages have been stagnant while the cost of living has skyrocketed, can be the reason why it’s taking millennials longer to be financially stable enough to buy a home.
Thus, it’s understandable why many millennials are taking so long to enter the real estate market. However, you should never think of purchasing houses as a race especially if you’re not financially ready to enter a housing loan. If you can’t balance student loans, housing loans, and other debts you may have, it may not be a smart move to enter the real estate market just yet.
Use Technology, But Don’t Take Personal Interaction for Granted
Previous generations didn’t have the luxury of real estate websites and online listings at their fingertips. Today, millennials can see what’s available on the market and can even take a virtual tour of potential houses before contacting a real estate agent. Around 81 percent of older millennials used an app to find their home.
Real estate companies are taking advantage of this new trend and have come up with algorithms where people searching for homes can find listings that fit their needs and preferences.
While virtual tours are a convenient option, it’s never going to beat actually visiting the property. Virtual tours are impersonal and won’t give you a proper feel of what the house is like. It’s also easy to make photos and virtual tours look even better than it really is. But when you’re in the actual house, it’s more difficult for sellers to hide certain flaws that can dissuade you from buying the house.
With more millennials entering the real estate market, it’s possible that the spending trends are also bound to change. Housing is a necessity, and it’s only a matter of time we see how millennials will change the market with their purchasing decisions. When they do, it’s important that they be smart about their financial stability and do their research so that they’re buying the right home for the long run.
