Austin Business Journal reports, "Few millennials believe their generation can afford a home, and some are so desperate for an affordable purchase they would be willing to buy a home with serious defects.
According to a new survey of millennials by Clever Real Estate, just 21% of millennials believe their generation can afford a home, a substantial decline from 52% who said the same in early 2024. Additionally, 96% of respondents said they have concerns about purchasing a home, with 44% saying they're worried about finding an affordable home — up from 35% in 2024.
The report notes that the median home price is about $420,000, but 68% of millennials who want to buy a home in 2025 want to spend less than $400,000. That's up from 57% who planned to spend less than $400,000 last year.
In fact, 57% of millennials said their desire to be a homeowner means they would be willing purchase a home that smelled like cigarette smoke — and 41% said they would purchase a home that had asbestos in it. Forty-one percent also said they'd be willing to buy a house with pests in it, such as mice, cockroaches or spiders; 40% said they would buy a house with a leaky roof; and 35% said they'd be willing to accept foundation issues.
Other findings from the survey:
- 74% of millennials believe high interest rates make now a bad time to buy a home, but 76% said they would be enticed to buy if rates were to fall in 2025.
- 56% would offer over asking price, though that figure is down from 79% last year.
- 67% regret not buying a home when prices were lower, and 32% expect to max out their budgets if they try to buy this year.
- 45% think their generation faces the greatest challenges in affording homes, with 33% pointing to baby boomers as being most responsible for the nation's affordable-housing crisis.
Home-buying challenges increase
The feeling that the dream of homeownership is slipping away comes as home prices rose at an increased rate at the end of 2024. A study by Fannie Mae found single-family home prices increased 5.8% in the fourth quarter of 2024 compared to the same time in 2023.
"Year-over-year home-price growth accelerated in the fourth quarter, following back-to-back quarters of deceleration," said Mark Palim, Fannie Mae senior vice president and chief economist, in a statement. "Inventories of existing homes for sale have improved from a year ago but remain historically low, due largely to the so-called 'lock-in effect.'
The lock-in effect suggests that homeowners who might be interested in selling their homes now would rather wait than wade into a housing market with mortgage rates that might be twice the rate they currently hold.
Palim stressed that since the beginning of October, mortgage rates have increased from a low of 6.1%, hovering close to 7% ever since, which hurts affordability. Those rates would have to come down to help ease the housing market, he said.
"The housing market in 2025 faces a difficult balancing act, with a notable decline in mortgage rates likely needed to help unwind the lock-in effect and thaw the supply of existing homes for sale," Palim said. "However, we believe such a decline would likely jumpstart demand from potential first-time homebuyers currently waiting to purchase, which could lead demand to outpace any improvement in supply, further exacerbating already-high home prices and purchase affordability."
The cost of a so-called “starter home” has soared in recent years, as well, according to a recent analysis by Redfin Corp. In 2012, the typical median sale price for what was defined as a "starter home" was $95,000, Redfin notes. That price rose in 2019 to $165,500 — and it rose further, to $250,000, last year.
The research also notes that while the typical household earns 8.9% more than they need to afford the median-priced starter home, in 2019, the typical household earned 57% more than they needed to afford the median-priced starter home. In 2012, the typical household earned 113% more, or more than twice as much as they needed.
“Starter homes aren’t what they used to be. A decade ago, a turnkey four-bedroom house in a nice neighborhood was often considered a starter home, but today, a small fixer-upper condo is often all a first-time homebuyer can afford," said Redfin senior economist Elijah de la Campa in the report. "The American Dream is changing; for many, it no longer involves a house and a white picket fence.”"
Source: Austin Business Journal
Written by: Andy Medici
Published: January 16, 2025
Posted by Grossman & Jones Group on
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