For years millennials searching for affordable housing accepted that their prospects of moving out of that fourth-floor walk-up apartment the size of a rest stop bathroom were slim to none. Booming prices, rising mortgage rates and sky-high student loans transformed what was once a typical American rite of passage into an exercise in frustration. It's part of the reason why only 37% of millennials (ages 23-37) own a house, compared to the 45% of both Baby Boomers and Gen X-ers who owned when they were the same age as today's millennials.
Recent studies suggest millennials have finally begun to make headway into purchasing their first homes, making up 42% of all homebuyers in 2017. Now a report shows young people may stand a better chance to own a home in even some of the most desirable markets, such as Portland, Oregon, and San Jose, California, as inventory has increased and housing prices have slowed in what had been scorching markets. "These markets have gotten very attractive," said Taylor Marr, an economist at national real estate brokerage firm Redfin. "What we're seeing this year is that the hottest markets aren't quite as hot. They're returning to about 2016 levels." In Seattle, for example, the number of homes sold above listing price dropped from 62.1% last year to 54.8%. To those holding out before making the hefty financial commitment that comes with home ownership, it's worth exploring whether this slowdown in certain markets signals a good time to buy.
Where housing prices are cooling
Referring to a "national housing market" is a bit of a misnomer since, outside of huge, nationwide events (such as the Great Recession) the local real estate market determines how much a house will sell for. It shouldn't come as a shock that the median price listed for a home in Long Island, New York, will be $510,000, while in Zanesville, a small town in Ohio, it's a much more affordable $139,900.
But what may be a potentially good piece of news for prospective homebuyers is the slowdown in rising house prices in hot markets that have benefited from the tech boom this past decade or so. "It's really isolated to the most competitive markets that have seen a change in the growth rates—typically West Coast tech hubs such as Seattle, San Jose, San Diego and Portland," Marr said. . He attributes most of the slowdown in these cities to an increase of inventory, easing the competition between prospective buyers from cutthroat to merely brutal. "All of these markets hit rock-bottom last year as far as available inventory levels," Marr said. "Now they're starting to come back up again."
Time to buy?
Purchasing a home will likely rank as one of your most significant financial decisions, and one you should think through carefully. The slowing down of housing prices in certain markets probably isn't drastic enough to cause anyone not already interested in buying to suddenly set the wheels in motion for a purchase.
Mortgage loan interest rates play a major influence on most prospective homebuyers' decision on when to buy, and the average rate for a fixed 30-year mortgage—considered by most analysts to be the benchmark for mortgages of all types—has been steadily rising. With the Federal Reserve indicating it will continue to hike the interest rate banks charge one another for loans that power the economy (which in turn cause banks to raise mortgage loan interest rates), securing a mortgage loan doesn't look to get any cheaper in the foreseeable future.
But if you're one of the roughly 80 percent of millennials who dream of owning their own house and also feel you have taken the financial steps necessary before making the financial commitment, the news that inventory is freeing up in cities previously considered untouchable may be enough of a catalyst to buy.