More home buyers are expected to hit the market, according to research by Zillow. As reported in National Mortgage Professional Magazine, a large migration of renters into homeownership will take over the real estate market throughout 2015, thanks to the more than 12 percent of current renters across the country who plan to buy a house soon. The report points out that this level towers 25 percent over the levels from just last year, due in part to renters realizing that homeownership is a solid long-term investment. Millennials, too, share in this sentiment — a segment of the population notorious for shying away from homeownership. There are many other reasons for this wave of new home buyers.
Fewer Affordable Rental Units
In the last few years, renters — particularly Millennials — have been populating the real estate market more and more as they put off the traditional family structure of marriage, home, kids. However, what this has done is make fewer affordable units available for rent thanks to the laws of supply and demand. Subsequently, rental costs are skyrocketing to accommodate this demand, spurring current renters to rethink their situation and turn to homeownership instead. They have been finding that a mortgage would be just about equal to what they’re paying in rent, so why not settle down?
Low Mortgage Rates
This is bolstered further by the fact that mortgage rates remain historically low, so it’s easier than ever to get a good rate. Hand in hand with that: home prices remain low as well, making for a more affordable purchase than in years past. The only question is how long those rates and prices will stay down. The bottom line is that the sea of available affordable homes has been pulling renters into the ranks of homeownership. Banks will have to be more forgiving in their mortgage approvals and rates, as Millennials are notorious for their shaky credit history due to being saddled with high student debts and limited income. This will likely translate to lower down payments as homebuyers adjust to this new experience.
A Look at Demographics
Large numbers of retiring baby boomers are making their way to Florida to live in condos and over 50 communities. Other segments of the population — specifically single adults, gay couples and non-native-born Americans — are buying more and more homes even though they differ vastly from the traditional American family structure. Overall, buyers are flocking to modern homes in urban areas to be close to work and the city rather than set up shop in cookie-cutter suburban communities, according to the Herald Tribune. A lot of this is attributed to Millennials entering the homeownership space — a group that up until now has been shedding the traditional order of things. Today’s buyers are different. They don’t necessarily need the big house with the white picket fence, a big yard and 2.5 kids.
The improved economy currently experienced by the American people is expected to continue to drive this trend toward home buying through this year and beyond.