In their forecast, Realtor.com predicts that millennials' share of mortgage originations will surpass an unprecedented 50% in the spring, outnumbering the share of total homes purchased by members of Generation X and baby boomers, at a respective 32% and 17%.
Millennials currently comprise the largest generation in the U.S., according to Pew Research. This generation, once marked by ambivalence or inability to buy homes, has begun to reconsider its goals.
The largest age bracket among millennials, 4.8 million, will be turning 30 this year and starting to reach the same milestones previous generations did in their thirties, such as starting a family. New financial and family needs may likely push them to search for new homes.
"It's an age at which they are on their first, second jobs," Realtor.com's senior economist George Ratiu tells CNBC Make It and adds, "many of those families are having kids, and with that their preferences have shifted; we're seeing that they obviously are very much interested in buying homes."
As millennial families grow, Realtor.com predicts that millennials' interests in "family-friendly lifestyles and affording housing" will supersede their prior affinities. According to several studies, millennials have typically preferred bustling downtown cityscapes with shops and cafés at every turn.
This shift in priorities is motivating millennials to consider new options in housing, forgoing luxurious and convenient urban condos for modest, mid-size city apartments and suburban homes.
But it's not a loss for millennials; in many parts of the country, suburban towns have evolved to become more dynamic than they once were. Builders, taking note of younger generations' interests, are developing neighborhoods that contrast with the Levittown assembly-line homes many have come to associate with suburbia.
Now, Ratiu says, millennials are experiencing a renaissance he's dubbed "the suburban downtown."
Ratiu describes the suburban downtown as "very walk-able, likable neighborhoods that combine retail shops, experiential places with office, with work, as well as residential properties."
While millennials are growing more open-minded in their search for housing, one issue stands in their way to home ownership: a scarcity in the supply of homes.
In fact, Realtor.com projects that despite steady demand for homes, the total existing home sales will decrease by 1.8% in 2020, as a "continuing supply shortage and moderating price growth will hamper buyers and tamp down sellers' expectations."
"Considering how many young people are becoming of age to buy, right now we are underbuilt by about 4 million homes," Ratiu says, highlighting a key issue that affects both buyers and sellers.
This shortage lends itself to increased competition, especially for entry-level homes. According to Raitu, there will be a lot of competition for first-time buyers with one another, as well as with investors who will want to take advantage of a limited market with high rental potential.
This is how Ratiu advises first-time buyers to prepare themselves to enter a competitive market:
- Get pre-approved for a mortgage: Getting pre-approved is the best way to prepare yourself for a competitive market. It'll help you understand which homes are realistically within your purchasing limits and makes your offer look more serious to sellers who want to avoid as many hiccups and delays with finalizing mortgages as possible.
- Utilize online tools: In a competitive market, it's important to act fast on a property, but equally as important to find new listings fast. These days, most buyers utilize third-party real estate sites (like Realtor.com, Zillow and Trulia) to view and receive updates on new or existing houses on the market.
- Be patient: Even if you do everything right, it may take some time to find the perfect home. But if you keep looking consistently, the right house will pop up in time for you to make an offer.
For more tips, check out how much the average home costs in 2020 or learn about mistakes you should avoid making if you're a first-time home buyer.
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