Millennials finally ready to buy homes

It’s finally happening. The Gen Y generation, often called millennials, is finally starting to buy houses. For the most part, they’re between 18 and 36, and they are finally moving out of their parents’ basements and buying houses.

What’s caused this shift in habits in the largest group of consumers in the market today? Several factors contribute:

Millennials see strong job growth, making them more willing to commit to buying a home.

For the first time in nearly 10 years, this generation sees the possibility of getting a better job and making more than minimum wage. The economy is truly improving.

Millennials are affecting the market dramatically, and more than anyone realized. In fact, half of all buyers are younger than 36 and half of sellers are older than 41. This represents a huge change in economic behavior from the past decade, when some wondered if the real estate market could fully recover from the recession.

It’s become the norm for buyers to make more than one offer before they close on a purchase. Twenty-four percent of buyers make three or more offers.

And sellers are getting smarter. When a seller today sees multiple offers arrive quickly, they often reject all of them, asking instead for a “highest and best” offer.

■ This year, as many as 3 million first-time home buyers will enter the housing market, according to a recent report by TransUnion. Younger consumers will represent the majority.

A sustained infusion of younger buyers lasting several years will have a dramatic effect on the marketplace, as first-time buyers make it possible for middle-agers and baby boomers to move up or even out, as they choose.

■ Another surprise from the new report is that 47 percent of millennial buyers live in the suburbs. One big reason for the popularity of suburbs is cost. As metro downtown areas have soared in popularity, so have the price tags on urban homes.

Because metro Atlanta has no physical boundaries (think oceans or mountain ranges), expect to see builders simply move out another exit on the interstate to find inexpensive land. Yes, the commute is awful, but the price is right. In addition, many of these younger buyers are able to telecommute or otherwise avoid a daily fight with traffic.

■ FHA loans require only 3.5 percent down payment and a credit score of about 580. Fannie Mae’s HomeReady program only requires 3 percent down for credit-worthy low- to moderate-income borrowers. The Freddie Mac Home Possible programs can require 3 or 5 percent down, depending on the program.

Lenders are slowly easing their underwriting standards and beginning to offer more creative loan programs targeted at this group, and millennials are responding in record numbers.

Bottom line: Millennials are buying real estate in record numbers. Watch for higher prices, followed by rising interest rates over the next several years.

This year, as many as 3 million first-time home buyers will enter the housing market, according to a recent report by TransUnion. Younger consumers will represent the majority. A sustained infusion of younger buyers lasting several years will have a dramatic effect on the marketplace.