Millennials face uphill battles on the road to property ownership
Property ownership — especially when it is a condo with a small association — can be extremely frustrating. I know from experience.
All the effort required to get your neighbors to respond about (then agree to) property issues, ensuring the building’s finances are in order, and property taxes and insurance cause massive headaches.
Then there are all the issues specific to your own space that you have to handle on your own. Pile all these problems together and you find yourself dreaming about the past — when you rented a nice place and could hassle the landlord to keep the place running smooth.
And then you snap back to reality and remember how important property ownership is, allowing for owners to create wealth and equity over time. Unfortunately, it seems millennials are being pushed out of the U.S. housing market. According to a new report from Fitch Ratings, the recent rise in interest rates has put up a new barrier for the much-discussed (and always aging) generation to purchase homes.
Back in October 2016 the average interest rate on a 30-year fixed mortgage was 3.4%, but in the first week of 2017 it rose to 4.2%. The report notes the median mortgage an under-35 person would qualify for dropped from a maximum of $120,000 to $109,000.
Millennials, who typically want to live in downtown areas with easy access to nightlife and public transportation, also did not receive positive news during the International Builders’ Show last month in Orlando. According to a National Association of Home Builders panel, the U.S. multifamily housing market will be cooling off in 2017.
NAHB Senior Economist Robert Denk explained at the Builders’ Show how multifamily starts data shows the sector “slowing down from recent historical highs in response to a more sustainable demand.”
The NAHB states that market indicators such as vacancy rates and inflation in rents “point to still-robust production, but a cooling in the marketplace after the sizzling pace of recovery.”
Signing the papers to purchase our condo ranked in the top five most exhilarating moments in my life and I was lucky to accomplish that at 30 years old. Of course, the Chicago housing market has changed since May 2012, but knowing that the people just behind me in college are going to have more challenges putting pen to closing papers is disappointing.
On a macro scale, millennials can be an annoying group that we have to deal with. Heck, you can define me as one of the older millennials and I know I have my issues. But, this group of thinkers, entrepreneurs, and tech-junkies is going to need a place to rest their heads and eventually begin their families.
As we all know, we are entering a new normal in the political landscape and changes are afoot. The housing market will be affected in some ways that might take a long time to develop. As an industry we need to continue to do our part to make housing costs — especially in the multifamily market — affordable.
This article was originally titled “Home sweet home?” in the February 2017 print edition of PM Engineer.