Getting a nice, affordable home isn’t nearly as easy as it once was.
Despite commonly held beliefs, most millennials do want to buy a home, and many are currently saving up to buy one. Despite this, millennials will have to fight an uphill battle against the current seller’s market, which has pushed housing prices up.
Starter homes (homes going for the bottom third of the local housing market) have been growing more scarce in recent years. In 2018, starter homes represented 20.9% of all available housing, according to findings by Trulia. This is bad for millennials who have to face rising housing costs on top of student loan debts, which are at historic highs after years of cost increases outpacing inflation. To add fuel to the fire, millennials are competing with real estate investors for the starter homes that are out there.
2018 saw investors buy about 20% of the starter homes in the US, which is over twice the portion that it was two decades ago. In some more popular markets, investors bought almost half of the most affordable homes and a quarter of all single-family homes. These investors will typically do one of a small number of things with these properties. Some will redecorate and rent out the property, some will flip the property, and some will wait months or years for the property to appreciate in value before selling them back onto the market. This all presents a serious challenge to millennials, who are hurting for money right now.
When it comes to the reasons for these rising costs, there are several. Rising construction costs are pushing property values up, as restrictive zoning regulations complicate the situation. Consumers are changing as well, as they have less purchasing power than they did a few decades ago.