The rate of homeownership for first-time home buyers is at a historically low rate nationwide. But with the help of remodeling and forward-thinking Millennials, this statistic is slowly rising.
Last year, first-time home buyers made up 35% of all home buyers. This was up from an all-time low rate of 32% in 2015, but it is still a decrease from the historical average of 40% over the past several decades. Some housing experts blame this trend switch on heavy personal debt loans, high home prices, and lower incomes for Millennials that are just starting out in corporate America.
Contrary to popular belief, it’s not all the Millennials’ fault, however, According to CNBC, competition for housing is soaring because Baby Boomers are spending more time in their suburban homes than the generations before them. This action is shrinking the housing market, so even when Millennials finally are able to afford a home, there are slim pickings to choose from.
And the problem just balloons from there. Millennials are competing for homes in a market marked by extremely low supply, which puts them at a disadvantage compared to financially stable Baby Boomers. As a result, many Millennials have nowhere to go but back to their parent’s house in efforts to save even more money.
That’s right. This circle of real estate confusion circles back to Millennials having to move into their parent’s home because of the increasingly competitive housing market, which is a result of Baby Boomer parents who won’t move out of the very home their kids are moving back into!
Sounds confusing, doesn’t it?
It is, and it’s not getting any simpler.
The good news is that there are a lot of cities with emerging real estate markets that are slowly but surely making room for Millennials. The online real estate database company Zillow surveyed nationwide metro areas on their friendliness to first-time homebuyers and they found that the southeastern U.S. is the best place for Millennials looking to buy cheap, build equity, and remodel homes.
Zillow ranked cities nationwide on a bunch of different criteria: affordability, forecasted growth on home values, reductions in list prices, and inventory. They found that the best markets were overwhelmingly in the south, with cities like Memphis, Orlando, Jacksonville and San Antonio being among the top cities that are the most accessible markets for first-time homebuyers.
There are also some cities in the north, like Rochester, New York which boasts a cheap median value home of just $132,000. Indianapolis is another one, with 13% of their home listings seeing price drops, and experts anticipate a 3% increase in values over the next 12 months.
What’s more is that all of these cities pose a hopeful change for Millennials once they buy their homes. More first-time home buyers are remodeling, as per data from home improvement giant Home Depot.
Home Depot’s Chief Financial Officer Carol Tome explained to Business Insider that America’s largest home improvement store served 424,000 first-time home buyers looking to remodel in the second quarter of the year. This is the highest on record since 2005. She believes that all this extra money that’s being spent on remodeling is boosting the housing recovery that the Baby Boomers are slowing down.
“So that is good news. Why? Because first-time homebuyers tend to buy homes that need repair and remodel … we anticipated this happening with millennials coming into an age where they start to form families, children, or pets or whatever their family unit might look like” Tome explains. “They’re moving into homes, which bodes very well for us and to your point, it extends the recovery.”
While Tome didn’t explain how much each Millennial spent on home repairs, on average a homeowner will spend between 1% and 4% of the home’s value annually on maintenance and repairs. For now, Millennials have more money to spend, and Baby Boomers are looking to save money by staying put.
Today in America, four out of five homes use asphalt shingles, but in many parts of the country homes of all kinds are seemingly impossible to find. Until housing supply increases, the increasingly competitive market is making it hard for young Millennials to buy starter homes. And as Millennial home buyers go, so goes the national housing market.
Just another day in the world of real estate.
