A survey released Wednesday by Realtor.com suggests this young generation of renters who have been slow to get married, have kids and purchase their first homes just might be taking a more favorable view about homeownership.
The change is only slight, but the study comes as first-time homebuyers made up a larger share of home sales in May.
Realtor.com said the share of traffic to its site and app from older millennial would-be buyers was 23 percent in June, up two points from January. A higher percentage of millennial visitors to the site also said they hoped to buy a home within three months – 65 percent in June vs. 54 percent six months ago.
Consumers who say they want to purchase within 90 days are considered “serious buyers,” said Jonathan Smoke, chief economist of Realtor.com.
Traffic also dipped from older Millennials (25 to 34) looking for places to rent, with the older millennial share of would-be renter traffic falling six points to 20 percent.
The survey was released during the opening day of the National Association of Real Estate Editors conference in downtown Miami.
In May, existing home sales in the U.S. were up 5.1 percent over the prior month, and first time home buyers made up 32 percent of buyers, vs. 27 percent a year earlier, according to the National Association of Realtors.
Smoke said during the conference that the increase in first-time homebuyers echoed data Realtor.com had collected on younger would-be homebuyers visiting his company’s site.
Whether the boost in first-time home buying will continue is another question.
The Millennial generation –generally folks entering adulthood up to their early 30s – will make up half the working population soon, but they’re not buying homes at the rate of their predecessors. It’s a big issue that some believe is one major factor holding back the housing recovery, and it’s not been helped by the job market and high student loan debts.
There are still many barriers to entry for first-time buyers.
Many young adults either can’t afford a home, don’t have cash for a down payment or don’t want the risk and hassle of owning one, which has led to more demand for rentals. Many buyers say they can’t find a home that meets their needs, and the supply of homes on the market – particularly in metro Atlanta – is also low making buying less affordable.
The sentiment toward homeownership is still not as strong for many young adults with recent memories of foreclosures and home price erosion from the recession.
Many still like the flexibility of renting and being able to more easily uproot for work.
To further compound things, credit standards are still very tight; the average credit score of an approved loan was about 730 in May, Smoke said.
“If you are anything less than above average you are having difficulty today,” he said.
Also on Wednesday, Atlanta-based Equifax released a report at the NAREE conference showing that student loan debt remains one of the biggest hurdles. The report said twenty-somethings aren’t taking on mortgage debt like past generations, a function of high student loan balances and poor job prospects.
Student loan debt for folks under 30 was $369 billion in 2014, more than double that reported in 2004.
The Equifax report also found a high correlation between lower wages and higher default rates on student debt.
Equifax cited a Federal Reserve Bank of New York survey of renters that found more than half of respondents said their debt was too high or they hadn’t saved enough as reason for not buying a home. Only about 8 percent were fearful of home price declines.
“Equifax data suggests that the conventional theory—millennials are the rental generation and uninterested in home ownership—is only a part of the story,” Dennis Carlson, Equifax deputy chief economist, said in a news release. “Importantly, large amounts of student debt and less than stellar job prospects for recent college graduates make the dream of home ownership shine less brightly than in the past.”