Millennials comprise the majority of would-be homebuyers, which is why several companies are on the lookout for buyers coming from this generation. A recent report shows, however, that millennials are no longer choosing to live in main cities and are instead moving to the suburbs. What are the implications of their move?
Credit still remains as the number one factor preventing millennial homebuyers from entering the market, reports CNBC. Current data shows that credit conditions remain unnecessarily tight, which in turn, helps keep young homebuyers from purchasing a new home.
"There are roughly 87 million would-be homebuyers in the millennial generation and 91 percent of them say they intend to own a home one day. Lenders must prepare today to meet their needs," said Joe Tyrrel, executive vice president of corporate strategy at Ellie Mae.
Aside from the credit scores, millennial homebuyers are reportedly having a hard time saving for the down payment. While the Federal Housing Administration (FHA) allows borrowers to make a 3.5 percent down payment, the downside of this is that borrowers need to get mortgage insurance premiums.
More than one-third of home loans issued to millennials since 2014 were said to have come from the FHA loans. While this seems like positive news for the real estate market, millennial homebuyers continue to have a hard time buying their own home. The publication notes that regulators should reassess current government policies and see where the problem lies to solve the continuous drop in homeownership level.
As previously reported here on Realty Today, a recent study showed that millennials are not saving enough for the down payment on their dream home. The survey conducted reflected that young homebuyers do not realize that they need more money to pay for the down payment.
For example, millennial homebuyers in San Francisco believed they only needed $69,650 for the down payment. However, current market conditions dictate that they need double the amount that they had in mind.
