Strike While The Iron’s Hot: It’s Time For Millennials To Buy
Current mortgage rates are some of the best we’ve seen in the last couple years.
The 2008 demise of the housing market has been well documented. The years leading up to the collapse made for a perfect storm of sorts. Prices and demand were both climbing, interests rates were low, and mortgages were easy to come by—even to those for whom it shouldn’t have been. The market was a veritable powder keg, and eventually, when those questionable mortgages began to see increased defaults, the proverbial fuse was lit.
When things took a turn for the worse in 2008, the casualties were steep, both for the everyday consumer and on the institutional level. Banks were forced to close, and even market stalwarts like Lehman Brothers and Bear Sterns fell victim—taking more still with them.
In 2012 things finally began looking up again, if in a somewhat lopsided fashion. Cut to—this year and January 2016 saw an 11 percent increase from the same time the year before. In fact, according to Forbes, in January 2016 “existing home sales were the second strongest month since 2007.”
Things aren’t perfect by any means. The market isn’t as rosy as it might at first seem. Construction output numbers are holding steady and consistent with a market in recession, which means the rising prices may be due, in part, to increasing demand rather than an increasing number of buyers. The middle class isn’t currently enjoying the spoils of the recovering market, and then there are the millennials. Between wanderlust, crippling student loan debt that’s exceeded $1 trillion (and growing), an alarming level of unrealistic expectations and misinformation—there’s any number of reasons to keep renting.
Still, there may be light at the end of the tunnel.
For starters, current mortgage rates are some of the best we’ve seen in the last couple years. Furthermore, the wide-held adage that you need a 20 percent down payment when buying a home is becoming increasingly debunked. Add to the mix a number of buying options, some of them government backed and requiring single digit down payment, and the prospect of buying suddenly becomes a lot more feasible.
So, now that buying instead of renting is on the table, a few small steps can make a big difference in getting that first set of keys.
The first, and perhaps the most obvious change is reducing expenses, and if possible, increasing income to save more and save faster. For those who can, freelancing and part-time jobs, while a hit to one’s social life, mean putting more money away for that down payment. The flip side of that is cutting costs. Sure, a spacious, upgraded single-bedroom rental in a desirable neighborhood is great, but it comes at a cost. Take New York, for example: adding a roommate (or three), commuting from another borough, and living with more modest amenities can mean savings of hundreds—if not thousands—a month. Suffer a little today, reap the home-owning rewards down the line.
Secondly, have a plan. Know what type of home you want to purchase, and how much you’re willing to spend. The responsible budget for a fixer upper flip versus a “forever home,” for example, are two very different things. Once you’ve established a target maximum number, stick to it—don’t torture yourself by looking at listings that are out of your league. At best, you’ll come down with a bad case of FOMO, and at worst, you might end up stretching your finances too thin on an upgraded pad that you can’t actually afford.
At the end of the day, home ownership isn’t for everyone. If you’re thinking about buying but have been hesitant to take the plunge, now might be a great time to reconsider your options.
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