An Inside Look at the Next Generation of Home Buyers: Will Millennials Start Moving Away from Renting and Start Buying?

Interest rates are up, but so is the economy. As the busy buying season ramps up, more millennials are investing in real estate.

Don’t call it a comeback, they’ve been here for years. They just haven’t been buying homes. The Millennial generation, or ‘Generation Y,’ is defined as anyone between the ages of roughly 20 to 35. And as they continue to age, they’re poised to become the most dominating demographic in the workforce. That’s why many real estate professionals are taking note of the trends and priorities that shape millennials’ home buying decisions.

After the recession and housing bubble burst, this younger generation has become far less likely to invest in real estate. Instead, millennials are opting for rental properties. But as the economy strengthens, some millennials are shifting their views.

Chicago realtor Sara Wilburn of Coldwell Banker, a millennial herself, has notices that most young people aren’t buying homes. That’s not because they don’t want to, but rather because they simply are uneducated about their options. With low interest rates and assistance programs, young people have a myriad of options when it comes to purchasing over renting.

“I think many millennials would be surprised what they can qualify for,” Wilburn shared. “For example, in the last couple of years there was a program that gave $7,500 to first time homebuyers to go toward their down payment. And just recently, there was a program called the HELP Grant that gave down payment assistance of up to five percent of your mortgage amount, not exceeding $21,205. That’s a huge amount of money for free with very few stipulations like buying within certain census tracts in the city and surrounding suburbs.”

It was programs like this that attracted Sam Kramer, 25, to the world of real estate investment. The millennial recently purchased a home with his fiancé after qualifying to apply for a mortgage with little to no down payment on a home through WHEDA, or the Wisconsin Housing and Economic Development Authority.

“I wanted to buy a house to be better prepared for my future,” he said. “I don’t intend to live in this home for the rest of my life, but in order to someday afford my ‘forever home,’ I need to build equity in this property from paying a mortgage instead of monthly rent.”

As the economy continues to improve, more and more young people are echoing those sentiments and loosening their purse strings to invest in a home. In fact, according to a study by the National Association of Realtors, for the third straight year millennials were the largest group of recent homebuyers. They made up 35 percent of home purchases. The same study found that millennial homebuyers were purchasing properties with an average price of $187,400 and a size of 1,720 square feet.

With the busy spring selling season upon us, even more millennials will embark on their home buying journey. So what steps do they need to take in order to make the right investment for their financial situation?

Wilburn says to take a moment and determine your location and comfortable monthly payment first. And don’t get too hung-up on this being in your “forever home” right off the bat.

“Don’t think of it as a lifetime commitment, because you’ll most likely be selling in four to seven years. But the best piece of advice that I can give is to use a realtor. Buying a home is one of the largest financial investments that you’ll make in your life, so you want to make sure that you’re educated going into the process.”

Kramer, on the other hand, says to consider being a millennial an asset when you’re buying a home. You may not know all of the mortgage jargon yet, but this age bracket is uniquely positioned to make informed decisions.

“You have vast amounts of resources at your fingertips—don't be afraid to do your research,” he says. “Knowledge will be your ally when trying to purchase a home. Go into the whole process knowing what you can afford, what you want compared to what you need, where you want to live and never forget that there will always be another house. Even if you love a home, don't spend money that you can't afford.”