Millennials are the leading segment considering home ownership as rent prices increase due to low vacancy.
LOWELL, Ark. – Across the nation, rent prices continue to rise as the vacancy rate of rental units has reached a 21-year low, according to the U.S. Census Bureau. With landlords raising rents, this is moving an increasing number of people toward home ownership. Across all but four of the nation’s 70 metro areas, rent increased by an average of 15 percent between 2009 to 2014 (Realtor.org*). In Arkansas rent prices have increased by 25 percent since 2011, in Missouri rent prices have increased by 12.8 percent since 2011 and in Oklahoma rent prices have increased by 10.6 percent since 2011 (Zillow Rent Index).
About 5.2 million renters say they expect to purchase a house in 2015, up from 4.2 million in the previous year, potentially a reflection of the improving economy, according to the Zillow Housing Confidence Index released in March.
An increasing number of these first-time homebuyers are expected to be in the millennial generation. In 2014, millennials made up 32 percent of the U.S. housing market, up from 28 percent in 2012, and have pulled ahead of the older Generation X as the largest segment of buyers, according to the National Association of Realtors.
However, the majority of potential homebuyers between the ages of 18 and 34 are unaware of closing costs – a key financial component in purchasing a home (USA Today, “Closing costs are a mystery to Millennials”*).
While it can make fiscal sense to own a home and begin building equity instead of renting, it’s important to have a grasp on the fees and other expenses associated with home ownership. A first-time homebuyer needs to understand and be ready for not only the down payment, but also the closing costs, which encompass fees such as title and escrow, lender fees, and the price of an appraisal, which can vary widely. Over the past few months, we have seen more and more young consumers taking the step from renting to owning and we expect this trend to continue.
Home ownership is a financial and lifestyle goal that many people aspire to. If you’re ready to leave renting behind and pursue home ownership, there are numerous things to consider.
Some of those things are:
- How much money do you have saved?
- Down payments are typically five to 20 percent of the price of the home.
- Consider how much debt you currently have to make sure you’ll be able to make all of your payments, including the mortgage.
- Look into your credit score. A low credit score could keep you from a better interest rate on a mortgage loan.
- Consider how long you’ll likely be in the home. Generally, the longer you plan to live in one place, the more it makes sense to buy.
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