Millennials transition into housing market as rents become more expensive
Tuesday, Oct. 6, 2015
While the Valley’s economy continues to improve, the housing market has lagged.
“It’s been the one major missing piston in the whole economic recovery,” said Jim Huntzinger, chief investment officer of BOK Financial. “Housing has been slower than it almost ever has been coming out of any major recession.”
And who do the experts blame? Millennials, mostly.
Millennials, once labeled “the generation of renters,” have appeared to have no interest in buying homes – until now.
“Partly, it’s the millennials (who) have been reluctant to buy homes,” Huntzinger said. “And there appears to be evidence now that that’s beginning to change.”
Sixty-five percent of millennials ages 21 to 34 looked at real estate websites and apps in August, according to a recent report from Realtor.com.
The push comes at a time when it’s more expensive than ever to rent, according to Zillow Real Estate Research.
“We’re actually starting to see a younger generation of buyer coming to the table,” said Nick McCully, co-founder of Strong Tower Real Estate in Scottsdale. “I think they’re being forced to a little bit because of the shortage of good rental inventory.”
According to Zillow’s research, renters can expect to spend 30 percent of their income on rent, while buyers can expect to spend 15 percent on a monthly mortgage payment. These numbers change slightly for Phoenix, with 28 percent of income spent for renters and 17 percent for buyers.
Regardless of the numbers, some millennials said they continue to fear the commitment of buying a home.
“I think people are really spontaneous now,” said Natalie Mullan, 22. “People aren’t getting married as young and having families as young. I think millennials have just so much more freedom.”
Keith Strickland, 24, agreed: “My main goal is not to own a house, but to move forward in my work.”
Despite the reluctance of some, the generation makes up about 68 percent of all first-time buyers, according to the National Association of Realtors 2015 Home Buyer and Seller Generational Trends report.
“We found millennials are very pragmatic in their finances, just black-and-white, comparing numbers,” McCully said. “But (they’re) not necessarily looking at the overall situation on why something like renting versus owning is a cheaper way to go.”
Huntzinger said he’s optimistic because of the affordable housing prices along with low interest rates.
“(Millennials) are more inclined to buy a house now,” Huntzinger said. “And once that happens, I think you’re going to see good activity in the housing market locally, here in Phoenix.”