A Younger Buyer’s Market
Millennials helped shape the market in 2015, and will continue to play a substantial role as the economy continues to improve. Millennials age 25 to 34 make up slightly more than 13 percent of the U.S. population, and rising rents are putting pressure on the renters among them to buy.
Realtor.com pegs the oldest group of Millennials – those aged 25 to 34 – as constituting 30 percent of purchasers of existing homes. Millennials are expected to continue as the largest demographic of homebuyers in 2016, prioritizing neighborhood safety and home quality. City centers and “closer-in” suburbs will be their preference as they look for older homes and shorter commutes.
Younger members of Generation X – age 35 to 44 – are expected to make up the second-largest portion of homebuyers after accounting for 20 percent of home purchases in 2015, according to realtor.com. The third largest group of homebuyers in 2016 is expected to be older individuals or couples, age 65 to 74, who are looking to relocate or retire. This group made up 14 percent of homebuyers in 2015.
Millennials still face significant hurdles in terms of getting financing, even as their job situations improve and their wages increase. Even if they are paying down their debts, lenders may look at how much they still owe and take a pass or require a bigger down payment than they can cover with their savings.
“The biggest hindrance for Millennials is student loan debt and being unable to qualify for a loan,” Alonzo said. “Until we can get some changes through the government on interest rates for student loans and how they qualify for loans, I think we’re going to see those problems with them being able to get into the real estate market.”
The 2016 presidential election promises to have a major impact on the industry, even if the campaign fails to register in the market. Guzmán referenced mortgage interest deductions as one area that could come under fire by a new administration seeking to cut the deficit.
“If they’re not friendly to housing, we could be at risk of losing a couple of things, especially policies that actually help homeowners,” Guzmán said. “If they’re looking at cutting the deficit, they could be cutting mortgage interest deductions. If they do it across the board, in Illinois that translates into $3,000 in tax relief as an aggregate. That money’s nice at the end of the year, especially if you’re seeing stagnant wages or whatever the case may be in your personal economy.”
“Obviously, there are a lot of major policy decisions that have to be made about the housing market,” Smith said. “Income tax, interest rate reductions, Fannie and Freddie. Those are big policy issues that any new administration will likely meet and make decisions on.”