Given how millennials do their research, it is not a surprise that they have changed the way to purchase real estate. As they invest a good amount of money on retail goods they want (e.g. quality shoes), they will most likely do the same when buying homes.
Millennials have been buying up more houses, especially ones that cost cheaper. Being avid internet users, they can easily search for options on the internet. What they commonly look for in a home are updated rooms, kitchens and bathrooms so they can get more comfort at less expense on repairs.
Compared to Generation X who purchase homes that come with mortgages at a price of $280,000 and Baby Boomers with $258,000, the Millennial Generation is seen buying homes at a median price of $237,000.
With the observation that they were buying homes at prices up to $350,000 during the summer of 2017, it is possible that they will exceed Generation X with home purchases at a price of $350,000 – $700,000 once 2018 ends.
Why Debt Is Involved
Knowing millennials, when they reach a certain age, they just want everything to be done right especially when it comes to gaining independence. With their habit of doing intensive research, they would want to move into a home that will cater to their needs and comfort.
One of the main factors that cause real estate debt is the fact that the prices of homes continue to increase at a faster rate. This can be a problem especially for millennials who are currently studying because when their student loans increase it will become a bigger problem to get financing for homes.
This is the way lenders identify how a person can handle their monthly payments and pay back their debts at the same time. This kind of strategy is a great example to explain the situation of millennials and their debts in real estate.
On October 2015, the debt-to-income ratio of mortgage for millennials became 37% while it increased to 38% on October 2017. At that same time Generation X reached a debt-to-income ratio of 37% while the Baby Boomers reached 36%.
According to Danielle Hale, chief economist of realtor.com, millennials have been consistent with their debt-to-income ratios and their down payment percentages.
Solutions to Consider
If you are a millennial who is struggling with real estate debt, one of the keys towards real estate success is budgeting. If you are currently working, you can set aside the extra income you earn for paying for debts or use an income-driven repayment plan to help you in reducing student loans. These come with different plans, including calculating borrowers loans on a monthly basis based off how much you earn.