It used to be expected that buying a home was a milestone in reaching adulthood, but these days, home ownership is just not realistic for a large section of the millennial population. These potential first-time home buyers are kept out of the housing market by ever-increasing prices, wages that can’t keep up and, perhaps bafflingly, less construction of affordable homes.
Who’s building and who’s buying?
Currently, the amount of houses valued at more than $1 million has quadrupled in the years since 2002. This is a fairly unprecedented development, and though the total proliferation of million-dollar and above homes is still a fraction of the less expensive homes on the market (at only 4 percent), this is an alarming upward trend. In many cities with a pricier market, more high-end houses than ever are approaching $5 million. Is it just that everything is more expensive these days?
Not exactly.
One major issue is the lack of homes themselves. Often, building affordable housing is not incentivized, so builders will choose to build more expensive, more profitable residences. This is an issue plaguing many metropolitan areas, and it’s one of the key components of what’s being considered an affordable housing crisis. But even if you’re lucky enough to find a decent deal, wages are fairly stagnant across the board, even though unemployment has been decreasing. All these factors put would-be first-time home buyers in a difficult situation with few options. Of course, we all know one way to afford something you can’t outright pay for…
So what about loans?
To buy a house, in virtually all cases, you’ll need to take out a loan, also known as a mortgage when property ownership is involved. Typically, these mortgages will be bought up by the government-sponsored financial organizations Fannie Mae and Freddie Mac, as long as they meet certain criteria.
On average, loans that surpass $424,100 are considered “jumbo loans,” and though the limit is higher in certain, more expensive, markets, these loans are seen by lenders as a fairly risky situation. They’ll favor wealthier customers at the expense of others. But now that home prices continue to increase, wages have stalled and loans are ineffective for a growing number of homes, you can see how there’s an affordability crisis.
Takeaway
In the current economic climate, it’s a struggle for many young millennials to get on their feet, much less afford a house. The number of renters keeps growing, more young people are living at home and finding a job out of college can be difficult. It’s a shame, then, that affording a house as a first-time home buyer will remain out of reach for so many under current market conditions. Until then, it’s wise to think about where you’re living and working. Ensure you can support yourself, live comfortably and maybe don’t spend so much money on dining out.
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