Millennials dominate the housing market with mortgage rates close to historic lows

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Millennials are the strongest purchasing power in the housing market. They are the largest group of home buyers who benefit from a favorable combination of income stability and low mortgage rates. This is what Better.com knows well.

“Millennials account for more than half of all Better purchase orders per month” in the first quarter of 2021, says Emanuel Santa Donato, vice president of Capital Markets and Lead Acquisition at Better.

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America’s Largest Generation Late Start Buying Homes

Millennials are now the largest generation in the United States. The youngest are now 25 years old. For some, it’s a little young to buy a home, but definitely in the right age range.

In part, millennials are such strong contenders in today’s marketplace because, as a group, they are delaying buying houses. Many of them reached the home buying age during the Great Recession. Millennials have seen millions of homeowners stand helplessly by their side as the value of their homes plunged to below (sometimes much below) their mortgage balances. It was only natural that millennials wanted to wait for the chaos in the housing market to subside before taking the plunge in what is usually the biggest purchase of a person’s life.

This delay means that many millennials were more advanced in their careers before buying a home. They had more time to increase their income and more time to save on the down payment – both factors can make you a stronger mortgage applicant.

Generation Z is now ready to buy houses

Younger buyers have seen the housing market crash, so the average age to buy a home is now around 40. But that doesn’t mean Generation Z is out of sight. According to a 2020 report by the Bureau of Consumer Financial Protection, the average age of first-time homebuyers is 32, and half of all newcomers are younger. The oldest members of Gen Z are now 24 or 25 years old and are starting to look for ways to get rich.

“We are seeing an interesting increase in the number of Generation Z clients (the youngest generation aged 25 and under) enjoying historically low interest rates and buying homes across the country,” says Santa Donato. “The number of Gen Z apps on Better increased 57% from January to March and 124% from March 2020.”

Mortgage rates remain at historic lows

You may be tired of hearing this mortgage interest rates historically low. You may even be skeptical about the “historical” part, especially if you are young enough to keep mortgage rates low the entire time you studied the housing market. But during your parents’ lifetime, the mortgage rate of 14% was real.

The interest rate has a huge impact on affordability. If you can afford to pay off the $ 1,000 loan, you can borrow about $ 240,000 at 3%, but only $ 85,000 at 14%.

This is an extreme example, but keep in mind that since ancient times, interest rates between 6% and 12% have been the norm. With an 8% payment of $ 1,000, you will receive a $ 140,000 loan now. Make no mistake when we talk about today’s low rates, we are actually talking about how much home you can buy.

Prices are guaranteed to fluctuate. When they rise, it can take a long time before they return to what they are today. At the time of this writing, the interest rate on 30 year fixed rate mortgages averaged around 3%.

Home ownership creates wealth

Buying a home can help you get rich. IN City Institutean economic policy think tank states that most families benefit economically from buying a home. For most households in the United States, ownership is more financially beneficial than renting. Home ownership is a particularly effective financial instrument for low-income households.

Millennials and Gen Z receive competitively priced loans from lenders such as Best mortgage… Better funded $ 25 billion in loans in 2020 and $ 14 billion in the first quarter of 2021 alone, according to Santa Donato.

The sooner you begin your journey to buying a home, the more capital you can accumulate and the more likely you are to move to a more valuable home. Millennials are now ramping up their capital, and Gen Z are realizing they can benefit from an early start.

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