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Managing Millennial Expectations

by Boston Agent

With the economy on more solid footing, many are ready to strike out and buy their own homes. Nielsen expects Millennials to spend about $1.6 trillion on purchasing homes and an additional $600 billion on rent in the next five years. Of those Millennials surveyed, 80 percent said they either plan to buy a home or they already own one. This maturing market spells good news for the real estate industry, both in terms of a general desire among Millennials to own a home and the generation’s size. The Millennial generation comprises about 77 million Americans, or 24 percent of the U.S. population. It is roughly the same size as the Baby Boomer generation and seems to be on the verge of stepping into home ownership.

Saving for down payments remains a struggle for many Millennials. The NAR’s Generational Trends report revealed that about 97 percent of Millennial homebuyers in 2013 took on at least some debt to purchase their home.

Charles King, a sales associate with Terrier Residential, recommends educating young homebuyers regarding their options for making the down payment.

“Get a loan officer involved to educate the buyer or recommend they put only 3 or 5 percent down,” King said. “It can be difficult to do that in the Boston market but sometimes you find the right place at the right deal.”

In fact, a typical down payment for a Millennial homebuyer was just 5 percent, compared to 10 percent for Gen Xers and 23 percent for the oldest homebuyers. Twenty percent of Millennials said they had trouble saving for the down payment.

Twelve percent of all homebuyers included in the survey said that they had to put off buying a home because of their debt loads. Millennials were no exception, with 56 percent citing student loan debt as the most significant financial roadblock they needed to overcome, followed by automobile loans for 38 percent, credit card debt for 30 percent, Child care expenses for 11 percent and health care costs for 8 percent.

About 42 percent of Millennial homebuyers said that it was harder to apply and get approved for a mortgage than they expected. Most – about 96 percent – opted for fixed-rate mortgages. Conventional loans made up the majority of mortgages for Millennials, at 46 percent, followed by Federal Housing Administration loans at 38 percent and Veterans Administration loans at 7 percent.

King encourages Millennial homebuyers to learn as much as they can about the market. Rather than getting frustrated or trapped in a deal that they don’t really want, they should decide what they want and be patient.

“Millennials need to be educated about the market,” King said. “Unfortunately there is little inventory in and around the Boston area and prices are very high right now so it can be a difficult time to buy. It’s helpful to reinforce that patience is necessary in this situation. The right deal will come about at the right time.”

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