As stated recently in a Realogics Sotheby’s International Realty (RSIR) blog, “The main cause of Seattle’s urban evolution is, first and foremost, that people want to live here.” That fact is reflected in the constant stream of people moving into the city. Earlier this year, The Seattle Times reported that Seattle grew 18.7 percent in the last decade, gaining 114,000 people and ranking as the fastest growing city in the nation. That growth is expected to continue through the next several decades; and by 2035 the expected population of Seattle will gain another 120,000 residents (and another 115,000 jobs).
A recent article published by Forbes outlines millennial moving habits, asking "why do millennials move?" As Maureen Henderson writes, while "the stereotype may have them shacking up Chez Mom and Dad . . . 59% of 18- to 35-year-olds currently live in a locale other than their hometown and almost 80% have moved at some point in their lives, not counting moves made to attend college."
As Henderson continues, "the reasons that compel millennials to pull up stakes are a fascinating grab bag. 51% have changed locations for a job, while 48% say they've moved for lifestyle reasons or for a new experience. Less predictably, almost a third have moved to get away from family and friends, perhaps trying to loosen the apron strings with their helicopter boomer parents" and "a romantically-minded 46% report that they moved for love."
What are the hottest cities for Millennials to buy homes in for 2016? A recent Realtor.com article outlines, "Where's Hot - and Where's Not - For Home-Buying Millennials" in the coming year. As Yuqing Pan writes millennials are making their presence known in the housing market: "numbering 43.5 million, the older group of millennials (aged 25 to 34) makes up 13.6% of the U.S. population but fully 30% of the current population of existing-home buyers."
Rather than try to move to "trendy" cities with high price tags such as New York City and Los Angeles, "young home buyers are increasingly turning to cities that are relatively affordable and have lots of jobs and maybe even a trendy atmosphere all their own." And one of those more affordable cities for 2016 is likely to be Seattle.
With a median listing price of $398,000 and a 14.9% population share of older millennials, Realtor.com places Seattle 7th on their list of 10 cities, writing that "the headquarters of Microsoft, amazon, and many other tech companies large and small" mean that there has been "an influx of educated, young tech workers, which contributes to its uniquely cool culture." And of course, don't forget about Starbucks of course!
In a recent letter to millennials, Jonathan Smoke of Realtor.com describes the biggest obstacles preventing millennials from homeownership. He nailed down four factors that are giving millennials the most cause for concern:
- Student Loan Debt - This can cause problems when trying to secure a mortgage, because "in order to get a qualified mortgage, you need a DTI of no more than 43%, so a very large student loan balance could disqualify you right off the bat."
- Credit Score - Given that history is one of the largest factors in determining credit scores, caution is necessary because "the average FICO score for a millennial with a mortgage this year is 714" whereas the average score of an American is 695.
- Down Payment - While having that 20% down payment is ideal, "the average millennial this year could only put 7% down." Smoke suggests aiming for a 10% down payment and saving as much as possible.
- Rents Are Rising - Many millennials are concerned with rents that keep rising faster than incomes: "the majority of renters in the U.S. now have to spend more than 30% of their income to rent a typical home, and that means they're starting to sacrifice spending in other areas such as food and health care."
According to a recent article in Business Insider, some markets favor millennials purchasing rather than renting. Based on general findings by Trulia, the article says that "buying is 36% cheaper than renting on a national basis, based on September home prices. That's the best differential since 2012 when it was 38% cheaper to buy than rent. Buying is also cheaper than renting in each of the nation's 100 largest metros." A study of millennials, however, yields a different outcome.
- "It's 23% cheaper for millennials to buy than rent in 98 out of the 100 largest metros."
- "It's cheaper to rent in Honolulu and Silicon Valley."
- "The South and Midwest housing markets are great for young buyers."
- "Rising prices and rents in some markets spur big swings in the rent vs. buy math."
So where does Seattle stand? Well, according to the chart below, mortgage rates would have to rise by 1.35% in Seattle in order for renting to become cheaper than buying:
While it may seem incomprehensible for the generation coming of age in the Great Recession to be purchasing homes, the rate at which rents are rising makes renting to be a less economical option for a growing number of millennials.
While nationally the median age at which people are buying homes is rising, the situation is just the opposite here in Seattle. Despite the existence of student loan debt being the main hurdle for most millennials, many here in Seattle work in the tech industry, which allows them the ability to pay down debt quicker. Coupled with historically low interest rates on home loans and too high of rents, the ability for Seattle area millennials to purchase a home will only increase.
It's no secret that the Millennial generation is coming into the home-buying market in full force. And it is also no secret that this is the first generation to have grown up their entire lives with the computer and Internet at their fingertips. As such, the demand for innovation and ingenuity for the real estate sector has never been higher.
In a recent article from Inman, a real estate news source for realtors and brokers, Jason Turner breaks down what brokers should and shouldn't be doing amidst the growing rise of new media and marketing strategies.
The more open and approachable a broker is, the more appealing to a Millennial buyer. Despite such innovations as being able to search for homes from the convenience of their smartphones, Millennials are really searching for a personal touch from a dedicated broker that is going to be able to mentor and be available to them with indispensable knowledge from firsthand experience.