“Millennials are the most likely generation to be making plans to purchase a home within a year (19%), followed by Gen Z (13%) and Gen X (12%)…Prospective buyers in the youngest two generations are primarily first-time buyers:  88% of Gen Z buyers and 78% of Millennial buyers are reaching out to homeownership for the first time in their lives.”

“In terms of the type of home these prospective home buyers are interested in, 40% are looking to buy an existing home and 19% a newly-built home. The remaining 41% would buy either a new or existing home.”

Bottom Line

1. How Can I Better Understand the Process, and How Much Can I Afford?

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

3. Saving Takes Time: Practice Living on a Budget

“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”

Bottom Line

“Last month saw the largest year-over-year decline of housing inventory in almost three years with a dramatic 12 percent decline, pushing the number of homes for sale in the U.S. to the lowest level since January 2018.”

“The market is struggling with a large housing undersupply just as 4.8 million millennials are reaching 30-years of age in 2020, a prime age for many to purchase their first home. The significant inventory drop…is a harbinger of the continuing imbalance expected to plague this year's markets, as the number of homes for sale are poised to reach historically low levels.”

If You’re a Buyer…

If You’re a Seller…

Bottom Line

“The dream of homeownership is alive and well within “Generation Z,” the demographic cohort following Millennials. Our survey…finds that Gen Z views homeownership as an important goal. They estimate that they will attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).”

Bottom Line

Here’s what three experts are saying we’ll likely see in 2020:

“I think the biggest surprise from the forecast is how long the market is staying in this low inventory environment, especially as Millennials are in a major home-buying phase…sellers will contend with flattening price growth and slowing activity with existing home sales down 1.8%. Nationwide you can look to flat home prices with an increase of less than 1%.”

"Interest rates will, on average, remain lower…These lower rates will in turn support both purchase and refinance origination volume in 2020."

“If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we’ve become accustomed to the last few years…consumers will continue to absorb available inventory and the market will remain competitive in much of the country.”

Bottom Line

Here are several perspectives to consider on the inventory issue facing housing next year:

“Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.”

“Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it’s not enough to meet the increasingly strong demand.”

"As millennials -- the largest cohort of buyers in U.S. history -- embrace homeownership and take advantage of this year's unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home."

Bottom Line

• According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time homebuyers is 32.
• With more millennials entering a homebuying phase of life, they are driving a large portion of the buyer appetite in the market, keeping buyer activity strong.
• More and more “old millennials” (ages 25-36) are realizing that homeownership is now within their grasp, and they’re actively dominating the first-time homebuyer market!

Some Highlights

• According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time homebuyers is 32.
• With more millennials entering a homebuying phase of life, they are driving a large portion of the buyer appetite in the market, keeping buyer activity strong.
• More and more “old millennials” (ages 25-36) are realizing that homeownership is now within their grasp, and they’re actively dominating the first-time homebuyer market!

Some Highlights:

• According to NAR’s latest Profile of Home Buyers and Sellers, the median age of all first-time homebuyers is 32.
• With more millennials entering a homebuying phase of life, they are driving a large portion of the buyer appetite in the market, keeping buyer activity strong.

 “Saving for a down payment is one of the biggest obstacles faced by first-time home buyers. Dispelling the 20 percent down payment myth could open the path to homeownership for many more.”

 Myth #1: “I Need a 20% Down Payment”

“Americans still overestimate the qualifications needed to get a mortgage, resulting in qualified potential buyers not even considering homeownership. Indeed, the Urban Institute report revealed that 16 percent of consumers believed that the minimum down payment required by lenders is 20 percent or more, and another 40 percent didn’t know at all.”

Myth #2: “I Need a 780 FICO® Score or Higher”

Bottom Line

 “Millennials, those young adults now aged 23 to 38, are now entering their peak household formation and homebuying years.”

“Millennials are different than previous generations—not only in their delayed homebuying but also in how they approach interactions with financial institutions, including mortgage lenders. Taking a picture of a check on their phone and depositing it without visiting a branch is not novel, it’s the way Millennials learned to do banking. They expect real-time access to account and transaction data and are frustrated when it’s not available.”

“When Millennials apply for a loan, the mortgage lender must qualify the borrower and determine who owns the property, how much the property is worth, and the property’s risk profile. Traditionally, this has been one of the most time-consuming and fragmented parts of the mortgage process…There are many moving pieces, each data point being sourced from a different provider, which can ultimately lead to a lengthy or delayed process.  What has historically been accepted as the process norm does not align with the expectations of the most prominent generation in the home buying market today. Millennials have come to expect rapid, digital workflows in their daily purchase decisions, and in their mind, the home buying process shouldn’t be any different.”

So, where do you go from here?

Bottom Line

• 55% want to own a home because they want to start a family
• 47% want to build wealth over time
• 33% want to make their family proud

• 66% believe saving for a down payment and closing costs will be challenging
• 58% feel covering the monthly costs of owning may be difficult
• 52% perceive a lack of knowledge about where to start

“More than half of Gen Zers who think they’ll receive help also think they will need to pay their parents back, compared to 40 percent of millennials.”

Bottom Line

“The largest group of millennials by birth year will turn 30 in 2020, which puts them entering their prime homebuying years”.

“Millennials—the most educated generation—have the highest incomes across their generational cohorts, even when salaries are adjusted for inflation.”

‘“The gap between the potential and actual homeownership in 2018 narrowed slightly as the growth in homeownership modestly exceeded the increase in potential demand,” he says, citing First American’s Homeownership Progress Index. “We expect the homeownership rate to further close the gap with potential in the years ahead as millennials continue to make important decisions, such as attaining an education and, later in life, getting married and having children.”’

“Lower rates are certainly making it more affordable to buy homes and millennial buyers are entering the market with increasing force. These positive demand drivers, which are occurring against a backdrop of persistent shortages in housing stock, are the major drivers for higher home prices, which will likely continue to rise for the foreseeable future.”

Bottom Line

“The largest group of millennials by birth year will turn 30 in 2020, which puts them entering their prime homebuying years”.

Who is David Bach?

 “Not prioritizing homeownership is the single biggest mistake millennials are making.” 

He further stated, “Buying a home is an escalator to wealth.”

“Young adults in particular aren’t hopping on this escalator, and it’s a costly mistake…If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none.”

“Start by crunching the numbers…actually do the math...This way, you’re really clear on your goals and you won’t just say to yourself, ‘I’ll never afford this!' A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay.”

“Oftentimes, buying your first home means you’re not buying your dream home…You’re just getting into the market.”

Bottom Line

Who is David Bach?

 “Not prioritizing homeownership is the single biggest mistake millennials are making.” 

• According to the US Census Bureau, “millennials” are defined as 18-36-year-olds.
• According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 32.
• More and more “old millennials” (25-36) are realizing that homeownership is within their grasp now!

Some Highlights

• According to the US Census Bureau, “millennials” are defined as 18-36-year-olds.
• According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 32.
• More and more “old millennials” (25-36) are realizing that homeownership is within their grasp now!

Some Highlights:

• According to the US Census Bureau, “millennials” are defined as 18-36-year-olds.
• According to NAR’s latest Profile of Home Buyers and Sellers, the median age of all first-time home buyers is 32.

“Last year about 43% of all condo home-purchase mortgage applications were submitted by FTHBs... Similarly, the data show condos were more popular with young homebuyers and empty nesters. For instance, 21% of all condo home-purchase mortgage applications were submitted by buyers aged 18 to 30, compared with just 17% of all single-family home-purchase mortgage applications by the same group in 2018.”

“The younger millennials are the largest cohort and are likely to drive much of the condo demand in the coming years”.

Bottom Line

"Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this. Their choices are falling more in line with their Gen X and boomer counterparts."

Bottom Line

"Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this. Their choices are falling more in line with their Gen X and boomer counterparts."

Bottom Line

“this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units estimated in December’s Insight. Older Americans prefer to age in place because they are satisfied with their communities, their homes, and their quality of life.”

“The most important fundamental in today’s housing market is the lack of houses for sale. This shortage has been identified as an important barrier to young adults buying their first homes.”

Bottom Line

“this trend accounts for about 1.6 million houses held back from the market through 2018, representing about one year’s typical supply of new construction, or more than half of the current shortfall of 2.5 million housing units estimated in December’s Insight. Older Americans prefer to age in place because they are satisfied with their communities, their homes, and their quality of life.”

“The most important fundamental in today’s housing market is the lack of houses for sale. This shortage has been identified as an important barrier to young adults buying their first homes.”

Bottom Line

• “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
• The top reason millennials choose to buy is to have control over their living space, at 93%.
• Many millennials who rent a home or apartment prior to buying their own homes dream of the day when they will be able to paint the walls whatever color they'd like or renovate an outdated part of their living space.

Some Highlights

• “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
• The top reason millennials choose to buy is to have control over their living space, at 93%.
• Many millennials who rent a home or apartment prior to buying their own homes dream of the day when they will be able to paint the walls whatever color they'd like or renovate an outdated part of their living space.

Some Highlights:

• “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
• The top reason millennials choose to buy is to have control over their living space, at 93%.

Bottom Line

• a FICO Score ≥ 620
• a Back-End Debt to Income Ratio ≤ 25%
• no Foreclosures or Bankruptcies in the last 7 years
• no severe delinquencies in 1 year

“We now know there are millions of buyers with the income & credit necessary to qualify to buy a home. The biggest question is: Do they know it? …Unfortunately, many renters don’t investigate homeownership simply because they don’t believe it’s an option.”

Bottom Line

• a FICO Score ≥ 620
• a Back-End Debt to Income Ratio ≤ 25%
• no Foreclosures or Bankruptcies in the last 7 years
• no severe delinquencies in 1 year

“We now know there are millions of buyers with the income & credit necessary to qualify to buy a home. The biggest question is: Do they know it? …Unfortunately, many renters don’t investigate homeownership simply because they don’t believe it’s an option.”

Bottom Line

Inventory

“In particular, the lower end of the market is experiencing a greater shortage, and more home construction is needed.”

Home Prices

Days on the Market

 “Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”

 “The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”

“Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”

Bottom Line

“Approximately one-third (32%) of Americans plan to purchase a home in the next five years. Millennials are most likely to have such a purchase in their five-year plan (49%), versus 35% of Generation X and 17% of baby boomers.”

The most common reason Americans prioritize buying is that they believe it’s a good investment!

1. Buyers want to buy
2. No competition!

Bottom Line

“Approximately one-third (32%) of Americans plan to purchase a home in the next five years. Millennials are most likely to have such a purchase in their five-year plan (49%), versus 35% of Generation X and 17% of baby boomers.”

The most common reason Americans prioritize buying is that they believe it’s a good investment!

1. Buyers want to buy
2. No competition!

Bottom Line

Who is David Bach?

“Homeowners are worth 40 times more than renters. Now, that first home doesn’t need to be a dream home, it can be a very small home. You might literally have to buy a small studio apartment, but that’s how you get started.”

“Don’t do a 30-year mortgage. You want to take that 30-year mortgage and instead pay it off early, do a 15-year mortgage. What happens if you do a 15-year mortgage? Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).”

“For fifteen years, you got to brownbag your lunch. Think about that! Brownbag your lunch literally for fifteen years. You can retire ten years sooner than your friends. You’ll have real wealth, because you bought a home – you’re not a renter. And you’ll be financially secure for life.”

Bottom Line

Who is David Bach?

Bottom Line

“Every $1,000 in student loan debt delays homeownership by about 2.5 months, but it doesn’t prevent homeownership entirely.  In fact, by the time college grads reach their 30s, those with student loan debt have a homeownership rate nearly identical to those who didn’t take out loans.” (emphasis added)

“2020 will be peak millennial, the year when the largest number of millennials will turn 30.”

Bottom Line

“Today’s older adults became homeowners at a younger age than today’s young adults. Half the older adults in our sample bought their first house when they were between 25 and 34 years old, and 27 percent bought their first home before age 25.”

“As people age into retirement, they rely more heavily on their wealth rather than their income to support their lifestyles. Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations. While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.”

Bottom Line