In 2012, The Atlantic called millennials “The Cheapest Generation.” Among the reasons for this less-than-sparkling designation was the historically low level of homeownership for the younger generation of Americans who’ve been coming of age during the Great Recession. But perhaps now, change is coming. A recent study from BMO Harris Bank says nearly three-quarters of […]
“We were delighted to see this age group sees homeownership as still valid and has a high degree of ‘want’ to own a home,” says Lori Day, BMO Harris Bank’s director of mortgage sales in Wisconsin and Minnesota.
Fifteen percent of millennials in Wisconsin plan to buy a home within the next year, and 39 percent plan to buy within the next two years, according to the study.
Mike Ruzicka, president of the Greater Milwaukee Association of Realtors, says there has been significant momentum for homebuying in Wisconsin in the last two years.
“Once the recession was officially over, which for real estate was in 2012, a levee broke and a flood of people came streaming into the market,” he says. “It’s almost like the normal world has come back.”
In large part, this momentum has been driven by first-time homebuyers. Oftentimes, that means millennials.
“It’s almost like a trickle-up effect,” says Ruzicka. “We need someone to purchase those entry-level homes in order for others to move into [higher-priced] homes.”
Wyman Winston, executive director of the Wisconsin Housing and Economic Development Authority (WHEDA) – an organization that often works with first-time buyers – says the number of millennials looking to buy homes has been on a positive trajectory, with steady year-over-year increases.
“In 2013, 77 percent of loans made [by WHEDA] were to millennials,” he says. As of the end of July, more than 80 percent of WHEDA’s 2014 loans have been to millennials, totaling more than $62 million.
In a general sense, young Americans’ desire to own their own home has survived the recession. But other factors have changed.
“Everyone that’s doing lending now is a lot more conservative,” says Winston.
Nowadays, there’s much more caution involved in the homebuying process. For many younger prospective buyers, says Ruzicka, “Banks are much more intrusive in looking into people’s financial background and financial history.” The lending side has slowed, with banks requiring things like “credit ratings, more authentication [and] more proof that people can pay the loan back,” he says.
Day says it’s “critical” for those looking into purchasing a home to meet with a lender early, even years before making a purchase. According to Day, it’s not as easy as it used to be to get preapproved, but the last six months have been especially busy, with more and more young people taking the initial steps to find out how to make homeownership a reality.
“Individuals buying today – and this is across all age groups – are planning more in advance and they are more particular,” says Day. “That’s a result of the downturn. People continue to be cautious, but homeownership is something they want.”
Myriad other factors are in play in this changing homebuyers landscape. Millennials are getting married later in life, demand more flexibility in their living situations and have moved more toward urban living, says Ruzicka. Rent prices are up nationally, but down in Milwaukee, and the level of student debt carried by young Americans has more than doubled in the last seven years, according to BMO Harris Bank.
And while reasons for optimism are mounting, there’s a long, long way to go. U.S. News and World Report recently reported homeownership for younger people is still at “the lowest level in recently recorded history,” and the Milwaukee Business Journal recently published 2012 U.S. Census data showing a big gap between renters and buyers in the region’s 25-33 age group. Any overnight change is highly unlikely, and how things take shape is still anyone’s guess.
But, as Ruzicka puts it, “As boomers aged to their 30s in the 1970s, there was a big increase [in homebuying]…. With millennials, that’s expected again. Really, for the housing industry, things look bright for the next 15 to 20 years. Right now, we’re at the beginning phase of millennials.”