While it’s become popular to lament those lazy twenty-somethings who won’t move out of their parents’ basements, buy houses and get the economy moving already, agents say Millennial homebuyers will jump into the market when they’re ready – and that interest may be stronger than expected.
According to the MacArthur Foundation’s 2015 survey, “How Housing Matters,” 67 percent of Millennials are renters, but more than half or 53 percent of Millennials view homeownership as a high priority for them personally.
“The average age of a first-time homebuyer is 29,” said Linda O’Koniewski, co-broker and owner of Melrose-based Re/Max Leading Edge. “Now 30-year-olds are moving to the suburbs.”
Ramsay Fretz, a 25-year-old Re/Max Leading Edge agent, is a Millennial and recent first-time homebuyer working in Boston. After saving up for 15 months, Fretz bought his first place with his girlfriend eight months ago in Beacon Hill.
“People have big dreams about their first place. They don’t view it as a labor of love, but as the next new and sexy thing,” Fretz said.
Fretz works with Millennials on the choice between renting and buying, and at each location he tries to make it clear to his clients that while it might not be their dream property, it might be a better investment than luxury rentals.
“I bought a very, very, very ugly unit in a great area,” Fretz said. “When I first saw it, the window looking over the Charles River, I thought, ‘It smells like equity.’”
According to the MacArthur Foundation’s 2015 survey, 88 percent of Millennials see a bright and optimistic future in their reach; however, 77 percent believe that owning a home will be harder for them compared to previous generations
“Ten to 20 years ago, people thought that buying a home was the best investment you could make for your future,” said Timothy Warren Jr., CEO of The Warren Group, publisher of Banker & Tradesman.
After the long recession and real estate slump, Millennials are feeling discouraged; “it’s not the world’s best investment anymore,” Warren said.
Warren said that often, the Millennial generation finds itself geographically jumping around to move ahead in their careers. As a result, the flexibility of renting outweighs the long-term investment of buying a home.
“People today have the desire to get ahead, and they can’t do that by staying in one place,” Warren said. “Those days are gone; companies are less loyal to their employees,” and employees are less likely to be loyal in return.
Warren said condominiums will be the new pathway for first-time buyers to enter the housing market, particularly in Greater Boston, where an affordable single-family home close to a good job is pretty much a unicorn.
Student Debt A Heavy Burden
Among the obstacles Millennials face, student loan debt is one of the most daunting.
The average student loan debt for the class of 2013 in Massachusetts was $28,565, according to the Institute for College Access and Success. After college, Boston is a “hub for young professionals,” O’Koniewski said. “People are so busy they don’t want to stand in line to buy a house,” so they turn to apartments, she added.
According to Hans Nordby, managing director of CoStar Portfolio Strategy, the Boston renters in highest demand for limited apartment space are between the ages of 20 and 35. Nordby said that Boston needs to develop more apartment property because the low inventory is driving up rents and may discourage buyers in the future.
Boston apartments are 48 percent more expensive than the national average, according to Equal Housing Opportunity.
“As rents get higher, then condo purchase may start to look more attractive to those same people,” Warren said.
Warren added that condo prices might move up in tandem with rents, another warning sign for potential Millennial renters and buyers.
“Since the recession, Millennials are skeptical [of owning] too much stuff,” O’Koniewski said. “They enjoy their freedom and not having a solid or aggressive career path.”
According to O’Koniewski, Millennials are dismissing the houses they can afford because they have too high an expectation for their first home, but there are ways for agents to combat those sky-high expectations.
“You can put makeup on a house; it’s called staging,” she said. “Most buyers don’t have any vision … buyers are shallow, and staging helps them fall in love with what they could have.”
It’s the duty and responsibility of a good real estate agent to teach Millennials what a good investment is, how to buy smart and how to build equity, she added.
The future of Millennial homebuyers is not without its challenges. However, housing experts say Millennials will start to transition away from ever-increasing rents and scummy landlords soon enough.
“If 60 is the new 50, then 30 is the new 20 … If we’re resetting the clock back by 10 years, then we must be more patient with Millennials,” said Amy Tierce, regional vice president of Wintrust Mortgage.
Furthermore, and in good news for the industry, Tierce believes real estate will be an attractive career destination for Millennials, once they get over the past 10 years of the bruised and battered memories of the real estate industry.
“There’s just a delay … everyone is throwing up their hands, wanting Millennials to buy houses right away. But I think they’re being hysterical … Millennials are renters for now, homeowners later,” Tierce said.
