Despite the uncertainties caused by the U.K.’s decision to leave the European Union and rapidly rising home prices, many surveyed households still believe now is a good time to buy a home. The one demographic that doesn’t agree? Millennials.
In the National Association of Realtor’s second-quarter HOME consumer survey, respondents answered questions about their confidence in the U.S. economy and various questions about their housing expectations, including questions about whether carrying student debt is tempering their ability and appetite to take on mortgage debt.
For the first half of the year, NAR’s survey found that the share of homeowners and renters who believe now is a good time to buy a home is, for the most part, holding steady. About 80% of homeowners think now is a good time to buy a home, and about 62% of renters say the same.
“Existing-home prices surpassed their all-time peak this spring and have climbed on average over 5% nationally through the first five months of the year and even faster in areas with severe supply shortages,” NAR Chief Economist Lawrence Yun said.
“Most homeowners appear to realize that if they’re ready to sell, they’ll likely find a buyer rather quickly and be able to use the sizable equity they’ve accumulated in recent years towards their next home purchase,” Yun said. “Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes.”
The share of renters who say it’s a good time to buy, though unchanged from last quarter, is down from 68% last year. Those under 35 were the least confident that now is a good time to buy.
In fact, about 50% of Millennials, and about two-thirds of Millennial non-homeowners who have student debt, are uncomfortable taking on a mortgage. What’s more, this group was less likely to believe they could even qualify for a mortgage.
“It’s becoming very evident from this survey and our research released last month that the financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” Yun said.
“At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide,” he said.
The American Bankers Association Foundation gives these suggestions to Millennials trying to decide if they should buy a home:
Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans.
Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25% to 30% of your gross monthly income. Recent regulatory changes limit debt to income (DTI) ratio on most mortgage loans to 43%.