Edina Realty says millennials are making waves in the market
With buyer demand for homes at a 10-year high, Edina Realty reports that millennial homebuyers are jumping into the market in larger numbers. Minneapolis was ranked by the National Association of Realtors as one of the top five affordable cities ...
With buyer demand for homes at a 10-year high, Edina Realty reports that millennial homebuyers are jumping into the market in larger numbers.
Minneapolis was ranked by the National Association of Realtors as one of the top five affordable cities for millennial homebuyers in September of 2014.
"When you look at a combination of factors such as job opportunity and housing affordability, the Twin Cities rises to the top, especially for millennial homebuyers," said Barb Jandric, president of Edina Realty in a news release. "Minneapolis has experienced a solid inflow of millennials who are attracted here by good jobs, solid communities and a growing inventory of affordable homes for sale."
The summer of 2015 has been the busiest in the Twin Cities metro real estate market in 10 years. The Minneapolis Area Association of Realtors reports that closed sales were up nearly 18 percent in July; 6,275 purchase agreements were signed in the 13-county Twin Cities. Typically, 60 percent of all home sales occur between May and August.
Millennials (or those age 34 and younger, according to NAR) now comprise the majority of current homebuyers. A 2015 study by the NAR found millennials comprised 32 percent of all buyers, compared to gen X buyers at 27 percent and baby boomers at 31 percent. With a median age of 29 and a median income of $76,900, millennials typically bought a 1,720-square foot home for $189,900 on average.
The NAR study also found that millennials are more apt than other generations to use a real estate agent as well as mobile or tablet real estate applications.
"Millennials saw their parents deal with the housing downturn and subsequent recovery," Jandric said. "They also tend to trust people in their parents' generation. While technology-savvy, they clearly value professional advice and involve their family and friends in a big financial decision like buying a home."
Jandric said several critical factors changed in the last 10 years. "Before the crash, buyers were approved for mortgages well beyond their means. Today, the mortgage lending industry has much better safeguards in place to ensure buyers aren't getting in over their heads," she said. She added that historically low rates and comparatively low home prices also make it a particularly good time to buy a home.
A highly competitive and increasingly expensive rental market is also driving more people into homeownership. A report by the Harvard Joint Center for Housing Studies found that half of U.S. renters spent more than 30 percent of their gross income on rent, compared to typical U.S. homeowners who spend around 15 percent of their income on monthly house payments, excluding insurance and taxes.
Mortgage programs from Fannie Mae and Freddie Mac enable first-time homebuyers to qualify for conventional loans with down payments as low as 3 percent. These programs will spur more people to move from rental properties into homeownership, Jandric said. Down payment assistance programs are also an option for qualified homebuyers.
According to NAR, 69 percent of first-time buyers were able to save a down payment in less than 18 months and half saved it in less than a year. "The best thing first-time homebuyers can do is get pre-approved for a mortgage," Jandric said. "Pre-approved buyers have an additional edge, so it's important to get this done before heading out into our highly competitive market."
Housing inventory remains an issue, with some buyers competing for a desirable home in a high-demand neighborhood. Active listings dropped 11 percent from the previous year. Edina Realty reports that nearly a quarter of the homes on the market sold for over the listing price - a strong indicator that the home received multiple competitive offers. "Buyers must act quickly and submit their offer after the first or second walkthrough," Jandric said. "It can be very frustrating to lose a home, so it's important to work with an agent who will help craft a competitive offer."
Housing prices continue to rise at a steady pace. The median sales price of a home in the Twin Cities 13-county region rose 4.7 percent to $225,000 in July according to MAAR. That's near the record high set in June 2006, and is strong evidence that it's a great time to sell a home.
The month's supply of homes for sale in the 13-county metro area fell 19.6 percent to only 3.7 months in July, which means that if no new homes came on the market, all homes would be sold within 3.7 months. Sellers are waiting only 63 days on average before accepting an offer, and they're getting 97.6 percent of their asking price.