- The Employment Outlook Looks Brighter
The job market brutalized Millennials during the recession years from 2007 – 2010, where unemployment among this group reached close to 15%. However, looking at recent numbers from the U.S. Bureau of Labor Statistics, employment news shows a positive slant.
The percentage of unemployed college educated people who are at least 25 years old continues to drop. At the moment, it stands around 2.5% This seems at odds with the current news that the job growth report in March was less than expected , gains in payroll fell short of expectation, and number of hours worked per week fell.
Nonetheless, as more Millennials join the workforce, more are likely to think about buying homes. In fact, last year a Bank of America/USA Today survey showed that 32 percent of participating Millenials said they were saving up to purchase a home. They are thinking about this because:
- More Millennials are leaving the nest.
During the recession years, families clustered together, young and old. But as employment grows, so do prospects and hopes. According to the Department of Commerce, household formation has taken a giant leap upward.
Back in the bad old days, Millennials were creating new households at the rate of only around 500,000 per year. However, last year, as the economy continued its creep up from the doldrums, more than 1,600,000 households were formed.
They all have to live somewhere. Large numbers of them, despite economic tribulations, desire to own a home. Whether they will attempt to purchase now or in the future is purely an economic issue.
Citing Census Bureau numbers, we have seen an overall drop in homeownership in the nation by about 3 percentage points between 2009 and 2014, from 67.4% to 64.5%.
However, Realtor.org indicate that in 2014 the average first time home buyer was 31 years old. Obviously, average means many were older—but many were even younger – which tells us that we are likely to see more Millennials buying homes in Boca Raton.
I recently sold homes to two Millennial households, so I know they are out there buying. And they were able to purchase because:
- Mortgage rates are still historically low.
Today, even as news from the Fed indicates that mortgage rates are due for another hike, rates on 30 year fixed mortgages read from a low of 3.78% to a high of 4.19%. Even with this slight rise, money is extremely cheap, which gives young families a greater opportunity to realize their dream of homeownership.
According to Redfin, close to 40% of surveyed Millennials indicated they would rather save money for a downpayment than spend that money on their nuptials.
Yet, even with those savings, we know that most Millennials will finance their first home with a down payment of less than 20%. That makes sense; current salaries make it hard to save that much money. That means they will pay private mortgage insurance, usually referred to as PMI.
This sum typically amounts to around a half percent of the loan amount. Freddie Mac and Fannie Mae will automatically eliminate this payment when the balance hits 78%. Millennial buyers. if they pay close attention, can have that charge eliminated, simply by requesting it, when their equity reaches 20%.
For FHA borrowers who put down 3.5%, there is no automatic cutoff of PMI. Those buyers will have to refinance in order to eliminate that burdensome charge. But even with that ½ point addition, the cost of current mortgages remains very low.
So, will we see more Millennial home buyers in Boca Raton? Based on the three factors of improved employment, greater desire for independence, and cheap money, it appears inevitable that more young families will be moving to our town.
Thinking about selling a home in Boca Raton? Thinking about buying a home in Boca Raton?
Please call us at 561-213-6139
Marc Jablon, the Jablon Team
Re/Max Complete Solutions