With the competitive housing market that developed during the 2020-2021 pandemic, more millennials are trying to buy their first home now than ever before. Real estate prices are high, interest rates are low, and millennials are finally ready to move out of their parents’ houses in search of a starter home.
Millennials are running into normal problems when it comes to finding a home, and they are also competing against more buyers, higher home prices, and a lack of information. Buying real estate has been a great asset to accumulate wealth in the past, but it’s important millennials become aware of how to take advantage of these housing trends and become homebuyers in today’s market before they buy.
Use technology available
One of the biggest differences between baby boomers and millennials is the technology that’s available at the touch of a button. According to the National Association of Realtors, millennials, both younger and older, make up the largest percentage of homebuyers by age group and you don’t need to be tech-savvy to understand websites like Zillow, Trulia, and Redfin. Doing research on market trends and real estate in your area is something all millennials should be doing in 2021. These apps are designed to help you target real estate trends, research sales that have been made in your area, and cut the older generations out of the competition. The older generation of homebuyers does not use technology as much as millennials do. Analyzing these apps and being tech-savvy will help buyers to do a Competitive Market Analysis (CMA) and find out what financial range the home they are interested in belongs to.
By using growing technology, millennials will become more competitive in the process of buying homes because the only remaining competition will be other millennials. Half the work is already done in becoming more competitive.
The same can be said for using more than just real estate apps. Millennials don’t need to be completely tech-savvy to understand how to search the internet for information about housing demand in their area or how the economy is going in the term of property sales. All of these uses of technology seem trivial but really a millennial is just more equipped to use this type of information compared to older generations.
Buy a fixer-upper
With the prices of real estate going up significantly in 2020 and 2021, it’s important to look for deals to stay competitive. You might want to be living in a home of luxury with no flaws but you don’t have money for a brand new home. This is where buying a fixer-upper property can squeeze its way into the preferences of millennials. Instead of looking for your dream home, a property that needs some work will have a lower asking price than one with no work needed. This can make millennials more competitive with previous generations that did the same thing. Homes millennials typically look at are out of their range, but considering a home with flaws can save millennials money year after year. Make sure you keep a record of what you were able to fix after the repairs are done so you can accurately have your home appraised for a higher value once it’s been fixed up.
Don’t hesitate when it comes to the housing market. If you find real estate that fits your preferences then you need to move in on the sale. In the market that has formed in 2021, if millennials hesitate on moving for a sale then they will miss out on it. Getting a pre-approved loan can help a millennial become a more realistic buyer in today’s market because it shows sellers that you are a prospective buyer with an actual loan to back it up with. The competitive real estate market trends the U.S. is seeing are not likely to go away for a few years so this isn’t something millennials can expect to change.
According to the National Association of Realtors, Millennials reported having student loan debt with a median loan balance of $26,000. According to the same group, this is one of the biggest reasons why this generation has waited so long to dive into real estate. The millennial generation is bogged down with a ton of pre-existing debt.
One method of easing your financial situation that the older generation didn’t do as much is house hacking. House hacking is when you set your preferences to show that you’re interested in multi-family homes. Then, you live in one unit and rent out the rest to cover your mortgage payments. It makes affording a luxury home possible even if you only have a median salary. A homebuyer is likely to do this if they are buying in an area that is a bit too pricey or are in the pursuit of accumulating wealth and homeownership at the same time. This is something millennials can discuss with a good buyer’s agent to help better direct you where to look.
Apply for assistance
Many millennials are first-time homebuyers and need a mortgage guide because they are unaware of the assistance they can find through government grants in their state. Many states offer down payment assistance that can sometimes fully cover a third, half, or even all of the downpayment amount of a home. According to the FHA, for individuals who can and can’t afford the downpayment on a home, they can find state down payment assistance on the FHA website. The median amount of assistance can vary by state but it’s important to look it up no matter what your income is. It’ll put you ahead of the competition that isn’t aware of these available resources and it’ll also give you more buying power than you already have.
Other relevant information for millennials
Build an ADU
Similar to house hacking, if your housing situation allows it you can buy a home and build in an accessory dwelling unit, or ADU. This doesn’t have to be a unit of complete luxury or even an extremely tedious process. Converting a barn or attic to an ADU can be all you need to rent it out and start collecting rent. This rent will help your financial situation and might even build equity in your home. It’s important that you scout out opportunities when you’re looking at homes as a homebuyer so you know whether or not you can make it work.
Get a parent to cosign
Not only will leaning on your folks help you secure financing, but it may also help you avoid common mortgage mistakes of first-time homebuyers. If the bank determines your financial situation isn’t where it needs to be but you know you’re ready for homeownership, you can always ask a parent to cosign on the loan for you. Heck, you’re already sharing their Netflix and HBO accounts, you might as well ask them to cosign for your home. Not only will it immediately make you look better among the banks, but your credit won’t matter as much when it comes to getting a loan. Millennials have been known for not caring as much about credit so a cosigner could come in handy for many of them.
Get educated on the mortgage process
Learning how mortgages work in the U.S. will be beneficial to anyone looking to become a homeowner. Age doesn’t matter, young and old millennials alike can own homes in a market with a lot of demand if they do their own research. You can figure out how much home mortgage you qualify for long before you start looking at homes as a buyer. This way, you’ll know exactly where to set your price range at.
In general, education about the housing market in 2021 will help any millennial with a better chance of buying real estate. The pandemic has caused a year of turmoil in the housing market and one of the largest pushes to secure a home in years is happening. It’s not breaking news that a luxury home might not be in the cards for every millennial, but any millennial can become a homebuyer and compete with buyers of their own generation and the other ones if they are equipped with the right information.
If you want to start out and you know nothing about homes, it’s best to look up basic research online as frequently as possible. It won’t take years for you to find homes that fit what you want. Even in the competitive market, new buyers are still finding homes. New buyers just need to make sure they know what they want and put in the research.