As we stated in a previous blog, fewer people are buying homes than in the past 50 years. On top of that, many people are having some serious buyer’s remorse — in fact, nearly 70 percent of millennials who have bought their home regret doing so.
We’ve started to touch on this in prior blogs, but this presents an incredibly unique opportunity for you, as someone who invests in rental properties. Considering nearly half of all millennials are currently renting, the window is significantly open for you to provide a need that is in high demand. Take a look at some of the reasons why people aren’t as keen to buy a house (and how a non-recourse loan could help you get in on the market), and apply with our non-recourse lenders at First Western Federal Savings Bank.
Millennials and Home Buying
Millennials are the generation most frequently talked about in the real estate and home buying world, and so much of this is because they are the next generation of young adulthood. When comparing the millennial generation with the Gen Xers and the baby boomers, they’re experiencing some financial strife and grief that hasn’t happened for previous age groups. Additionally, they’re the generational group with some of the lowest home buying rates, compared to similar data of people at that age, at different points in time.
So, why exactly aren’t millennials buying homes? Our non-recourse loan lenders take a further look:
Wages That Can’t Keep Up
Finding lower priced homes used to be relatively easy, depending on location. Nowadays, and as we’ve talked about in previous posts, mortgage rates are higher, and the same goes for house prices. This would be all fine and well if wages were rising just as consistently, but this hasn’t been the case. Buying a house is one of the greatest expenses in life, and fewer people are able to afford this type of investment.
More Debt, Less Savings
As CNBC reported, 80 percent of millennials are interested in buying a house, but most of this generation have less than $1,000 saved. This is not due to laziness, although the occasional baby boomer have been noted to think otherwise — this again points to wages that cannot meet the demands of the housing market, and area where prices have only continued to increase. Additionally, student loan debt racks nearly three-fourths of college graduates, with the average amount of college graduates from 2017 being $39,400.
In today’s society, people have to go to college if they want any chance of getting most jobs, and this degree sets them back financially for years — if not decades. Not to mention, paying off student loan debt, while having wages that are far inferior to what they should be, makes it nearly impossible to save for a down payment — let alone take on the expenses that come with home ownership.
It could be due to the near-hopeless nature that most millennials feel in regards to buying a house, it could be simply having a zest for exploration than previous generations have not collectively felt, but in this chicken-vs.-egg debate, the fact remains: most millennials prefer experiences to buying a home. Forbes reported the millennials as “the most important consumer generation for the travel industry.” There seems to be an overall trend in millennials caring less about buying a home and settling in one place, and more about exploring, moving around, trying different career paths, and seeing whatever they can.
It should be noted that people who are white have an easier time getting a mortgage than people of color. In 2015, the Pew Research Center reported that denial rates were significantly higher for African American and Hispanic households — 27.4 percent and 19.2 percent, respectively, compared to 10 percent for white households. This is unfortunately not anything new, as people of color have long been denied housing or mortgages due to racial biases. With as diverse a nation as the United States is, it’s not only important and equitable, but necessary for all potential homebuyers to be considered fairly — when applying for mortgages, and in every other aspect of life as well.
Fear of Failure
After the housing crisis of 2008, many are still reeling, and many are still fearful of experiencing similar problems. While millennials were not all buying homes back then, they’ve heard enough from family members and the news to know that there are risks associated with buying a house. Pair this with the fact that nearly 70 percent of millennials who have bought a home regret doing so, and it makes sense that millennials know very few people in their age range who are homeowners — and satisfied at that.
Why You Should Invest in Rental Properties
Millennials — and most people in the United States, for that matter, are choosing to rent for all of these reasons, and so many more. Regardless of their reasons, it practically goes without saying that now is an exceptional time for you to get involved with rental properties. This is an area that demands attention, and the needs of the housing market show no signs of slowing. People aren’t going to stop renting any time soon, and now’s your chance to invest in a solid and profitable opportunity.
Non-recourse loans are specifically designed for the purpose of obtaining a property to turn into a rental, such as for a vacation rental or for long-term tenants. With the non-recourse lenders at First Western Federal Savings Bank, you’ll be set to invest in properties that provide equity, as well as added revenue from rental income. With fewer people buying homes than in the most recent five decades, there has never been a better time to get invested in rental properties. Review our necessary and required documentation today before applying, view our YouTube channel, and get started on your non-recourse loan application today! We look forward to hearing from you.