Much has been written about the millennial generation and its impending impact on all facets of the economy. From a real estate perspective, millennials are prime to become the largest group of home buyers in the next five years. The Pacific Northwest is not without its place in this shift. Seattle is now home to the benefits of advantageous home loans, job growth, and stabilizing real estate prices. As rents continue to soar all over the nation, and even more so in places like King County, the draw of homeownership for millennials gains steam.
The stars are aligning
2014 saw a sizable slowdown in the upward direction of home prices throughout the nation. The slowdown itself does not raise red flags. Rather, what we saw last year was more of the market finally finding some stability in the growth. Prices will continue to edge their way up, but at a steadier pace than in years past. Couple this with motivating programs to draw out new home buyers and the stars align for millennials to make their way into the market.
At the end of 2014, the Federal Home Administration gave millennials a bump in the buying direction by raising its loan limits for the King, Snohomish, and Pierce counties. In an effort to match rising median home prices making loans more plausible for first-time (and low-income) buyers. This is an especially important option for millennials to consider as rents continue to soar and will continue to do so in 2015. Whereas renting has predominantly been the way of life for a majority of the millennial generation, their predecessors were more likely to be homeowners at the same age. Renting for longer periods of adulthood is truly a resulting trend of the economic downturn of the late 2000s. However, with rent becoming nonsensical when FHA loans are more available, Seattle millennials are poised to enter the real estate market in full force.
As a first-time home buyer and millennial, you won’t be alone in this adventure in Seattle. As one of the top 10 U.S. cities for job growth, millennials are flocking to our coastal piece of heaven. Realtors are more than aware of this growing segment of the market as renting– otherwise the no-brainer, go-to for new and young residents–and are gearing up for the influx of new, prospective buyers. One thing Realtors in the Pacific Northwest already know that their prospective clients will come to find is that the affordability of homeownership for the millennial generation is real. Average rent in King County currently hovers in the $1700s range, a steep price by national standards. Even less help to renters in the area, the latest additions to the rental market have largely been luxury spaces with steeper price tags. Conversely, homeownership is within reach for a greater amount of millennials.
Credit the strong local economy, but more and more millennials are prime to be homeowners. If you take federal tax deductions on property taxes and mortgage interest rates, homeownership is likely to be just a slight increase from renting on a monthly basis. Additionally, as larger market forces continue like the drop in oil prices homeownership will make more sense. For example, decreasing oil prices generally free up disposable income or lessen the blow for commuters. Beyond these obvious effects, lower oil prices lead to lower overall energy-related expenditures including residential spending. According to one study, over twenty percent of household energy-related expenditures come from residential consumption. Therefore, even inadvertent forces are making this the time for millennials to finally become homeowners.
Hit the ground running
As a first-time buyer, millennials will be challenged to move outside of their comfort zone–read: renting–to consider weighty options that ultimately mean more value for their pocketbook. Buyers do not fear, though, the right Realtor will help navigate the new terrain and the market will do its share to meet new demand as new home construction is forecasted to pick up in 2015 throughout the Pacific Northwest. Of course in order to hit the ground running, millennials should be clear on the fundamental basics of home buying including 1) making sure setting down roots is the intention, 2) all finances are in order and you know what you can afford, and 3) finding a real estate professional who is on your side. With many Realtors prime to aid this new generation of buyers, knowing who will really be able to help you find your way through the market to your perfect first home is key. New and old homeowners alike have a plethora of resources readily available to them to find the best Realtor, but the tried-and-true will always ring true including finding the right Realtor through referrals, demonstrated success in their target neighborhoods, and asking the right questions when vetting multiple agents.
Lastly, that same diligence in picking the right, seasoned Realtor is just as important for other buyers in the market. The steady influx of millennial buyers will mean more competition for those looking to buy on the lower end of the spectrum and the right agent is just as important for new and old buyers alike.