Marriage, Student Debt, Pets, and More: Millennials weigh the odds before purchasing their first home

Marriage and children have long been two motivating factors for home ownership, but what happens when those milestones aren’t achieved until later in life? Grappling with a higher cost of living, higher home prices, increased student loan debt and more mobile lifestyles, millennials are approaching marriage, children and home ownership with caution, renting longer than before, and holding out for homes that not only fit their needs, but also the needs of their pets.

In an October 2018 CNBC.com article, “Waiting longer to buy a house could hurt millennials in retirement,” the Urban Institute, a progressive think tank in Washington, D.C., found that the median age for a first marriage today is closer to 30, compared to the early 20s in 1960. Additionally, the share of married households with children, aged 18 to 34, dropped from 37 percent in 1990 to 25 percent in 2015.

With millennials marrying and starting families later, the housing market is being impacted as well, according to researchers at the Stanford Center for Longevity.

“The researchers found homeownership declining most steeply among people under the age of 30 when compared with other generations,” wrote Annie Nova, a reporter with CNBC, in the October 2018 article.

Terri Booker, a realtor with Brinkoetter and Associates, says she has seen these findings firsthand.

“Absolutely, millennials are (waiting longer to buy a home),” says Booker, “and I think that one reason is the uneasiness with the housing crash we had around 2008. With the volatility in those markets, they are waiting longer to buy, where many people (20 to 30 years ago), as soon as they got out of college used to buy, or they got married and used to buy.”

Karylle Wike, vice president and mortgage lender at Town and Country Bank, agrees.

“Many (millennials) are waiting longer to get married, so they continue to rent and live with roommates or move back in with their parents so they can afford to save for their first home,” explains Wike. “There are still many millennials that don’t want to pay private mortgage insurance, and they can’t save the 20 percent down to avoid that, unless they have roommates or move home to allow them to save those funds.”

Today, millennials are also facing, on average, $30,000 of debt at graduation, compared to an inflation-adjusted $16,000 in the early 1990s. In addition, Stanford researchers reported that those still paying on their student loans in their 30s are 32 percentage points less likely to own a house than those who never borrowed money for their education.

“Student loans directly affect so many young people,” says Wike. “The way lenders are required to calculate the payments on student loans is a ‘suicide mission’ for many first-time (home) buyers. They can’t afford to buy groceries with those calculations, let alone purchase a home.”

With more millennials traveling and relocating for work, a more mobile lifestyle may also make young people more reluctant to commit to a house.

“We’re finding that a lot of (millennials) are renting more just because they don’t know where they might live in a year,” says Booker. “We see that with people (moving into this area). If we can find a rental, they’ll rent and make sure they like it here because they don’t want to take the chance of losing money on a house when they move out.”

Additionally, Booker says millennials are more particular when it comes to the kinds of homes they gravitate towards.

“It seems like millennials want homes that are redone or newer,” explains Booker. “They’re not as able to do the updates because they don’t have the extra money or don’t know how long they’ll live in the house, whereas when I started selling real estate 30 years ago, a person who would have been equivalent to that millennial would buy the small house that needed updating because they knew they could update it and sell it and make money on it. Today that’s not the case, so millennials are really opting for things that are more updated than those same kinds of buyers 30 years ago.”

Millennials’ strong devotion to their pets influences their homebuying decisions, as well.

According to a 2018 survey conducted by Realtor.com, 89 percent of millennials who bought a home last year own a pet, and 79 percent of those pet-owning home buyers said they would pass up an otherwise perfect home if it didn’t meet the needs of their furry companions.

“Pets have been more important (recently) than they were 20 years ago,” says Booker, who’s been selling homes since 1986, “and we’re finding that with all buyers, not just millennials, if a home does not meet the needs of their pets, they will pass it up.”

Booker notes that one of the big selling points pet-owning home buyers are looking for is a large, fenced yard.

“Fences for dogs are important, but I think they’ve become even more important today because they’re more expensive, and in some of the houses, there are restrictions about what kind of fencing you can put in,” she explains. “You could end up spending $19,000 or $20,000 on a fence, so somebody will buy a house that maybe was their second choice with a fence (rather) than the first house that didn’t have a fence because they know how much more money they’ve got to put in to get a fence for their dog.”

Wike says she has witnessed prospective home buyers’ love for their pets through her line of work, too.

“Pets are like children to many buyers,” says Wike, which means pet-owning home buyers will often take safety into account when purchasing a home. “They (buyers) may not want to live on a busy street even if they love the home, or next to water, and they are looking for homes with sidewalks and big fenced-in yards, or places with nearby parks. Pets are an important part of the family for many home buyers.”

Despite later life milestones, higher home prices, increased student loan debt and simply the higher cost of living millennials face, both Wike and Booker say young buyers have lots of loan options when it comes to qualifying for and purchasing a home.

“Town and Country is a full-service bank,” explains Wike, offering everything from government loans (including VA and FHA loans) to rural development loans and conventional loans. Town and Country also offers a home ready 97 percent loan-to-value purchase loan for first-time buyers, which only requires the buyer to pay a 3 percent down payment, as well as IHDA grants for down payment and closing cost assistance and Down Payment Plus program grants, which match up to $6,000 for down payment and closing cost assistance for first-time buyers.

“With the loans that are out there now … there are a lot of three-and-a-half percent down FHA loans, or a five percent conventional loan,” says Booker. “There are still even some zero percent down loans, so yes, there are loan opportunities that will help (millennials) get into a home. Those opportunities are there, absolutely.”

For more information on home loans, visit townandcountrybank.com or call 1-866-787-3100.