Millennial Homebuyers Face Challenges and Opportunities
Posted by John Peña on Wednesday, March 15, 2023 at 11:03:44 AM
By John Peña / March 15, 2023
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Real Estate Witch recently released their "Millennial Home Buyer Report: 2023 Edition" with several insights from the largest home-buying demographic in the United States. Here are some of the most interesting points and our thoughts on those points.
Millennials find themselves in one of the most expensive real estate markets in U.S. history. Record low-interest rates, fierce demand, and limited inventory caused home prices to soar over the last couple of years. During this time, many millennial buyers were priced out of the market or outbid by wealthier buyers.
Higher Interest Rates and FOMO 😧
To tame inflation and a shaky economic outlook, the Federal Reserve has consistently raised interest rates. So, how has this affected millennials?
47% say that high-interest rates are a "significant barrier to homeownership."
81% wish they had purchased a home before the rates increased.
We speak with a lot of home buyers, and many of them lament the fact that the 3% mortgage interest rates are seemingly gone for good. Currently, the interest rates for a home loan are hovering around 6 - 6.5%. Do we think that interest rates are ever going to drop down to 3%? Unfortunately, we believe that it is unlikely that home buyers will see interest rates this low again.
The Covid pandemic was a unique event that affected the global economy and caused significant changes to just about everything. The ultra-low interest rates resulted from this global pandemic, and it is unlikely that the Federal government will need to lower interest rates to this level again.
We like to remind people that the average mortgage interest rate over the last 50 years has been about 8%. In the scheme of things, 6% is still pretty good, especially when compared with the norm of 8%.
The fact that over 80% of millennials surveyed expressed disappointment over NOT buying a home before the interest rates increase is interesting. It is challenging to predict what any market will do in the future. There was no way for millennials to guess when the market would shift.
While millennial home buyers may have missed out on the low-interest rates, some good news is that they spared themselves the torment of the aggressive seller's market. When the interest rates were at their lowest, the competition for homes was at its greatest! Remember, most homes at this time were receiving 10 - 30 offers, and many homes sold for $10,000 - 30,000 OVER the asking price.
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