Millennials are poised to become the largest percentage of home buyers in 2020… and the coronavirus pandemic might be a contributing factor. Although the U.S. economy took a big hit in 2020 and is currently in the middle of a recession, the housing market and real estate industry are quickly shifting and evolving. As a result, more millennials are buying homes right now than any other generation.
Mortgage interest rates are at an all-time low right now, so millennials are scooping up homes with a 30-year mortgage for less than in previous years. But why is now such a big time for new millennial homebuyers? In short, it’s all about the extra space. As a result of stay-at-home orders and social distancing guidelines, more Americans are spending time at home this year. That’s why more first-time homebuyers are finally taking the plunge and going after their dream home in the suburbs.
How exactly is the real estate industry changing in 2020? Let’s dig in.
How is Coronavirus Affecting Real Estate?
At the beginning of the coronavirus pandemic, one of the most surprising changes to the real estate industry was the sudden decrease in mortgage interest rates. While they have certainly fluctuated since then, they currently remain at some of the lowest ranges we’ve ever seen.
In June 2019, the average interest rate for a 30-year mortgage was 4.39%. Today? They rest at 3.36%, down from 3.42% in May of 2020.
Here’s Where Millennials Come In
Low interest rates such as these present an amazing opportunity for millennials, who are aging into their most active spending years. In fact, according to Joe Tyrell, chief operating officer at Ellie Mae, “Per U.S. Census data, there will be over 4 million millennials reaching the age of 29 to 30, each year for the next several years.”
In addition to reaching their peak buying age, millennials are extremely motivated to buy homes as a result of quarantining and social distancing due to the pandemic. It’s safe to say that no one enjoys quarantining by themselves in a 500 square foot apartment. The appeal of sprawling big cities is waning as more and more Americans are flocking to more suburban areas.
Unlike tiny apartments and condominiums, houses in less densely populated areas have ample space to spread out, try new hobbies, bring home new pets, and a myriad of other activities that make quarantining or social distancing more enjoyable.
Millennials are ready to buy and the covid-19 pandemic is creating conditions in the economy and the housing market that we’ve never seen before. When combined, we start to see huge changes in the housing market.
What Changes are Happening to the Housing Market?
So, millennials are hitting their peak home buying years in the middle of a recession and a global pandemic. In spite of those conditions, they’re still buying homes at unexpected rates which is having a ripple effect throughout the United States Housing Market.
Steady Demand, Decreased Inventory
With so many millennials actively buying homes right now, and production challenges as a result of government shutdowns, inventory is currently not meeting demand. According to George Ratiu, Senior Economist at Realtor.com, the current market is underbuilt by 4 million homes.
This has led to fierce competition among homebuyers—something that’s dampening spirits and leading to a decrease in home prices. Ratiu predicts that total existing home sales will decrease by 1.8% in 2020.
Some good news about the economy: while we are in a recession, the housing market remains strong. In the past, that’s often signaled that the rest of the economy will recover along with it.
Do I Really Need a Title Insurance Policy?
New homebuyers have to plan properly for their purchase, and that includes doing due diligence and proper research before they sign their closing documents. One key way to pull off a successful home purchase is by protecting your investment with a thorough title insurance policy.
Buying a home is a huge investment, one that’s certainly worth protecting. Title insurance will ensure that every millennials’ new home purchase is a successful one. Have any questions about title insurance? Looking for a North Carolina title insurance agency to help you find the best policy for your purchase? Don’t hesitate to contact our team at Tryon Title today.