Millennials: What They Might Mean to Real Estate This Year and Beyond

Millennials are the biggest demographic group in the country. But, of course they’re not the only one. There are many more and each one plays a unique role in the real estate you plan to do. Let’s take a look at all the generations in America and what they might mean to your real estate plans.  

Now of course the millennials became the largest demographic group in America last year. The millennials were born between 1981 and 1997. According to the US Census Bureau, there are now slightly more than 75 million members in the millennial generation. So with those numbers could they really change the face of real estate in America? Create a buying surge like never before? Well, yes. We’re starting to see signs that the millennial buying surge might be getting under way. Last year, the National Association of REALTORS said first time buyers made up 32% of the market. And now, 35%. The first time buyers are coming back to closing tables all over America. They want to buy homes! And if they can, they do. So if you watch real estate, the millennials are a generation to watch closely.  
The next biggest group of Americans is the baby boomer generation. The people born after World War Two between 1946 and 1964. There are slightly fewer than 75 million baby boomers. It’s close but not quite as big as the millennial generation. The baby boomers for the most part already own homes. Freddie Mac reports that the baby boomer generation holds close to eight trillion dollars worth of equity in real estate. That’s nearly two thirds of all real estate wealth in America. NAR reports about forty percent of them plan to buy again. So they’re a huge force in American real estate. They’re also more wealthy than younger generations.

Now in between the boomers and the millennials is the group of Americans born from 1965 to 1980. They’re called generation X or gen x’ers. They’re commonly referred to as the middle child of American generations. Gen X is also smaller than the boomers for a couple of reasons. One, they were born at a time Americans were having fewer children. Also, they’re generational span is one year shorter than millennials. Now the real estate implications of the gen X’ers however, is huge. As NAR reports, they’re in their peak earning years. They’re the most likely to be married and most likely to have kids in the house. They also buy the most expensive homes and the biggest homes of all the generations.

Now it’s just about millennials, gen X’ers, and baby boomers. There are older and younger generations too. But the vast majority of real estate transactions happen among one of those three generations. The millennials, the gen X’ers, and the baby boomers. Each with a different real estate dream. Each with different amounts of income, savings, and equity to make that dream come true. Together they are real estate in America. A fascinating patchwork quilt of you and me, our neighbors, our friends, and our homes.

One of the trends we’re seeing just makes me smile. The Gen Y generation, which is younger than the millennials. They do things differently. Different social media, different websites, different apps, and different view points. Why? Well they wouldn’t want to imitate the millennials because for the Gen Y’s, the millennials are just so….old.

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Show Me the Money

How much cash will you need to bring to the closing table?

Let’s start low and then build up. First of all, if you qualify for a VA loan, they allow a zero down payment. If you’re a veteran or an active duty service member, you need to know that. Also, if you’re buying a home in a rural area, ask your REALTOR about the Department of Agriculture program. Yep, the USDA has a zero down home loan program for people buying out in the country.

Now if neither of those programs work for you then you’ll have to come up with some cash when you buy a house. But, you do not need a 20% down payment. If you’re a qualified buyer you can find a good safe mortgage which requires as little as 3% down. And again, this is not some sub-prime back alley mortgage, this is a high quality home loan. So that’s a good starting point.

Now, how do you get the money? Well course people who sell one house and buy another, they just take the profit from the first place and buy the second one. But if you’re a first time home buyer you don’t have that ability. So for you there are basically four ways to get your down payment ready to go.

First, save it. Just sock away all the money you can and try to temporarily stop spending on things you don’t really need. Plenty of people have given up vacations or expensive dinners in order to conserve their down payment money. You can too. It helps by the way to have your money put in your savings account automatically – direct deposit. You never see it so you won’t be apt to dip into it.

Second, plenty of first time home buyers get the down payment from their parents. But it has to be a gift, not a loan. Lenders won’t allow you to barrow the down payment. Your parents will have to give you the money. It happens all the time all across America.

Third, if you have an IRA or a 401K you might be able to withdraw money for a down payment. Talk to your accountant about this one. You need to try at least to avoid penalties for early withdraw. So talk to a financial pro about whether that’s a smart move for you or not.

The forth way to come up with a down payment, your city or state might have a program that provides down payment assistance. Again, talk to your REALTOR about what programs are in your area. You might qualify, you might not. Many people are surprised that they can be making a pretty good amount of money and still get down payment assistance.

On last thought. I talked a lot about how to get into a house with a low down payment. But if you can, you should know, it’s almost always better to put down more. Put down as much as you can. Your monthly payments will be less, you’ll walk into the place with more equity. And if prices were to drop, you’ll have more protection against going under water. So more is better. And if you just don’t have more, that’s okay. Remember, you do not need 20%. If all you have is 3%, 3.5%, or 5%, don’t give up. Because the home you want could be within your reach.