Millennials, in particular, are finding that the housing market continues to be challenging. The desire to own a single-family home is there, according to Realtor.com and National Association of Realtors data. Realtor.com says that when millennials do buy (and they account for the majority of first-time buyers, the NAR says), they end up buying homes in their second-choice neighborhoods, which are more affordable.
But the reality is most millennials are weighed down by their share of $1.4 trillion in student loan debt, and the jobs they’re getting out of college don’t pay enough to cover rent, let alone all the costs of owning a home. Finding ways to make more cash is a high priority for most millennials, who are looking for every side hustle they can find.
Higher rent costs limit the amount of cash first-time home buyers can save for a down payment, and more first-time buyers than ever are seeking down-payment-assistance funds. It’s not a surprise that over the past 25 years, the average age of first-time buyers has risen to nearly 34 from 26.
On the other side of the house, mortgage lenders are cheering a rollback in regulations, which will make it easier for buyers to qualify for mortgages. Which, while helping more worthy buyers qualify (a terrific goal), will also serve to drive housing prices higher in those neighborhoods where inventory is already scarce, a simple function of supply and demand.
In Austin, where median home prices have doubled in the past five years, there is an estimated shortage of several hundred thousand housing units, according to Mark Wolf, founder and CEO of AHV Communities, who says his company will build more than 400 units next year.
Housing advocates say 90 percent of building codes are outdated and make it too expensive to innovate around new-home building. And while rental buildings are being completed and 700,000 new homes will be built and sold this year, they’re mostly being built at the higher end of the market. Few two- to four-unit multifamily buildings are being built, partly because of density concerns and a NIMBY mentality. Homebuilders overall are still challenged by the availability of lots, local restrictions, building materials and quality tradesmen.
Meanwhile, interest rates are rising and housing economists say they see a 5 percent, 30-year fixed-rate mortgage by the beginning of 2019; the only thing surprising about the 2018 housing market is that, like the stock market, it is steamrolling ahead.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.