Millennial Madness

Stay informed!? This is your market.

I recently pushed a video out on my social media platforms emphasizing how millennials are feeling about the current real estate market and their future prospect of purchasing a home.? The basic gist of the video is that 1 in 5 millennials feel as though they no longer have any chance of attaining what was once a part of the American Dream.? I emphasized that prior generations started with small homes (manageable loans), grew their equity, subsequently traded up in property and assets, etc until they were now at the phase to completely out-compete millennials for the best homes. It’s unfortunately part of the process.

This feeling was confirmed because as soon as I released the video I received a few messages to this effect: “all that ‘grind up from the bottom’ nonsense has been disproved!”. “So I’m supposed to buy an overpriced house now with these ridiculous rates?” “I’ll bide my time and just rent until things get better”.

That’s the sentiment.

So I’ll take this short amount of time you’ve allocated for me to express a few easy concepts.? This is a graph of home prices since 1st quarter 1963 through 2nd quarter 2023.? As noted on the chart, shaded areas indicate US recessions.?

You don’t need to be a mathematician to see the general trajectory of home prices and values over time in the US.? Ya, housing prices generally go higher so if you’re goal oriented enough to grab one…it’ll probably work out to your benefit.

This next chart is the mortgage rate chart from 1971 to around August 2023.?

I’ve placed this here so we could put “ridiculous rates” into perspective.? Take note that in 1981, the peak of mortgage rates you’re seeing there is about 18.5%.? The average mortgage rate from 1971 until now is settling somewhere around 7.74%.? So what does this mean? It means that rates are headed back to their historical averages. Yes, that is higher than the abysmally low 2.25% rates so many of us thought were “normal” at this point.? That won’t be happening again for…maybe ever.

And now… to rent or not to rent. Is that a question?? Let’s start in March 2022. That month is when most people started realizing that our mortgage rates were back on the uptick. You know, moving out of the 3% range into 4%. So let’s say that at that point, you simply decided “NOPE, I’m just gonna rent ‘cause rates are too high”.? That would mean you’ve been renting since March 2022 until now, September 2023 just awaiting a “better” entry point to purchase a home. Rates just kept going up.? That’s 19 months of renting, minimum. The average rental price nationally jumped over $2000 in June 2022. So…($2k x 19 months) roughly $38,000. That’s the simple cost of waiting for that “better” entry point. $38k going directly to the mortgage payment of the Gen X’er who took the hard route. Now if you’re not financially ready, then ya, renting has its place. Of course.? But if you’re financially set, what’s the hold up??

Jerome Hanson, REALTOR?, (www.jeromeinrealestate.com) Sellstate Alliance Realty & Property Management, 719-967-3015