Real Estate

Lagging Millennial Home Buyers: Just Give Them Time

Those involved in the real estate market may have noticed some demographic changes recently. Where before real estate (and much else) revolved around baby boomers, it’s now about the millennials. And while numbers vary, there are now some 75 million of them.

According to the most recent census, millennials—those in the 18–34 age range—now represent more than 25 percent of the population and 32 percent of potential home buyers, notes a survey by the National Association of Realtors^® (NAR). As they age, they’ll further surpass baby boomers.

This change impacts everything from technology to the family dynamic and, of course, real estate. NAR studies show that the proportion of first-time home buyers is down for the third year in a row, despite low mortgage rates and other economic factors that suggest first-timers should be buying.  Why? A Pew Institute survey conducted in 2013 shows that millennials are living at home longer, or they and their parents may be buying homes together for cost-saving reasons. Renting—which many millennials would prefer—has become less viable in many areas as rents skyrocket and inventory drops.

Another contributing factor in the shift in the demographic of home buyers is the shift in the job market. A New York Times article from earlier this year states that many of the new jobs are appearing in urban areas, where housing is often the most expensive. And millennials like to live, work and play in cities.  At the same time, they’re having trouble finding those jobs. Credit and student debt are concerns as well, and all this is limiting the ability of the first-time millennial home buyer to save for a down payment. Conventional financing (obtaining a mortgage without requiring mortgage insurance) needs a 20 percent down payment, and credit requirements are more stringent than with Federal Housing Administration. Asset reserves are necessary. Lower down payment options (namely FHA) allow a buyer to put down as little as 3.5 percent, excluding escrow account requirements, but the cost of entry is high.

Currently, FHA requires an up-front mortgage insurance premium (which is financeable) of 1.75 percent of the amount financed; the monthly insurance premium will vary based on down payment and term of the mortgage.  Millennial buyers, however, do want to buy homes. In summer 2015, millennials made up 30 percent of buyers, according to Realtor.com chief economist Jonathon Smoke. Most of these cited family changes (marriage, kids) as their reasons for purchasing.

Give them time, says Smoke: “They should represent two-thirds of all household formations over the next five years. Job creation will favor them. Their economic opportunities are strong. And they’re planning to start families, which increases the desire to purchase a home.” Adds Lawrence Yun, NAR chief economist: “The return of first-time buyers to normal levels will eventually take place in upcoming years as those living with their parents are likely to form households of their own, first as renters and then eventually as homeowners.”

Concludes Smoke: “They’re just getting started, and their sheer size will drive activity in housing for decades.”

Content provided by MiLEND, Inc. 

Understanding the Basics of Flood Insurance Coverage

So, what is flood insurance, and how does it work?

It seems that almost daily, we see news coverage of one area or another that has been seriously affected by flooding, and you may be asked to obtain flood insurance, or increase the coverage you already have.

So, what is flood insurance, and how does it work? It falls to the Federal Emergency Management Agency (FEMA) to study areas and create flood maps, which indicate the risk of flooding and how often FEMA expects floods to occur.

Based on FEMA’s flood maps, a risk factor is determined, which will in turn dictate the type of coverage required. Homes are categorized as being in low/moderate – or high-risk areas. Premiums are then determined and policies issued through the National Flood Insurance Program (NFIP), which was established in 1968 and renewed in 2012, and is set to expire later this year.

Factors that determine risks when issuing an insurance policy include elevation of the lowest point of the structure, the number of floors, and the age of a property.  Flood insurance is always written as coverage above and beyond traditional homeowners coverage. Typical insurance policies are very specific as to what they will and won’t cover, and often situations that are remotely related to flooding, such as backed-up sewers that happen during storms, may require special riders and premiums.

According to FloodSmart.gov, the average annual premium for a flood insurance policy is $700, and premiums are paid annually, in advance.

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75 Million Millennials Are About to Shape the Future of Real Estate

Bob Dylan was so right: ‘the times, they are a-changin’. And the residential real estate market is being swept right along.

While in Dylan’s day it was about the group known as baby boomers, it’s now about the millennials—more than 75 million of them. According to the most recent census, millennials now represent more than 25 percent of the population and 32 percent of potential home buyers.

That means that many of you reading this are or soon will be looking for somewhere to live. Your impact is inescapable, and here’s the upshot to date:

Studies in recent years, including one by the Pew Institute in 2013, show that a sizable proportion of 18-to-34-year-olds are still living at home. Another trend is adult children and their parents looking for accommodations together for cost-saving reasons, a recent National Association of Realtors^® survey found.

But not everyone is concerned for millennials: Jonathon Smoke, chief economist of Realtor.com, is bullish on them. He reports that in summer 2015, millennials made up 30 percent of buyers, many of whom cited family changes (marriage, kids) as their reasons for purchasing.

And while credit and student debt remain concerns for potential millennial home buyers, give them time. Says Smoke: “They should represent two-thirds of all household formations over the next five years. Job creation will favor them. Their economic opportunities are strong. And they’re planning to start families, which increases the desire to purchase a home. They’re just getting started, and their sheer size will drive activity in housing for decades.”

Content provided by MiLEND, Inc.