Let’s talk about Millennials and Real Estate

My sons are Millennials. My Walnut Creek Lifestyle freelance writer is a Millennial. More and more of my clients and colleagues are Millennials, as that generation continues to age into home-buyers.

So, realtors like myself are starting to notice more trends with the market geared toward that age group. It’s a different real estate market for Millennials than it was for their parents – nowadays, they are graduating with huge student loan debts, having trouble finding lucrative work out of college, and then struggling to pay sky-high rents and mortgages once they do get jobs.

That said, Millennials are driving the real estate market right now, which has made the following observations more obvious.

From San Francisco realtor John Solaegui:

There is a low inventory of single-family homes in San Francisco
Millennial buyers don’t care about parking spaces (though this might be more prevalent in San Francisco – it’s contradicted by the graphic above!) with the rise of ridesharing apps – they’d prefer having decks or gardens for outdoor entertaining
Areas like Noe Valley, Glen Park, Bernal Heights and The Sunset in San Francisco are extremely popular with Millennial buyers right now

From the California Association of Realtors’ REALTOR Magazine:

Millennials are cashing in on equity at a historic rate, thanks to rising home prices
One-third of Millennials say they are considering applying for a HELOC (home equity line of credit) in the next 18 months – much more than Gen-X or Baby Boomers
HELOC’s are popular with Millennials because they can consolidate debt and afford home remodels with them

I think this is an interesting trend in our market. Home prices are high, but so are the debts and loans owed by Millennials, so we’re seeing more and more interest in new ways around that issue. And even more interestingly, Millennials are changing the way we market homes – who cares about parking when you don’t have a car, right?

Home Equity Line of Credit (H.E.L.O.C.) are popular once again, because borrowers have now more equity in their homes. They also come into play for buyers with 80/10/10 financing, which allows borrowers to put 10% down and avoid paying PMI. That happens because they have an 80% loan-to-value (LTV) first mortgage and a 10% combined LTV HELOC or 2nd mortgage.

How dos it Work? Here it is:
– Rate: Prime +1.99%
– Payment: Interest only for 10 years – but you can pay it off sooner
– Draw Period: 10 years
– Repay Period: 20 years

Here is why I like them – if it is a small amount, (i.e. similar to a car purchase), it can be paid off in a relatively short time – especially if someone gets bonuses, their income is steadily increasing or they are stock rich & cash poor (IPO). It avoids paying mortgage insurance, and if you pay it off, you can use it down the road for remodeling.

The only concern is they are not a fixed rate and are tied to the prime can climb significantly and we all expect rates to rise, however we as an industry thought that would have already happened. It might just be a great option one buyer, but it isn’t for everybody.

I like to have these discussions with my buyers so that they are informed and can make the best decision for their needs & situation. Options are a beautiful thing….

~Kristin