Tired of paying $1,500 a month for a tiny 10×10 bedroom? Sick of that Craigslist roommate you split rent and living space with? Well, I’ve got good news for you: the time is right to buy your first house!
If you’re anything like me, you feel like a real estate expert after binge watching House Hunters for hours. And if you’re also like me, you think that there is NO way you can afford to buy a house.
But don’t write off the white picket fence just yet. According to a recent joint-press release from the Census Bureau and the Department of Housing and Urban Development, the warmer weather has nudged the housing market out of its winter freeze. Housing starts (construction lingo for breaking ground on a new house) were around 1.13 million last month, up 20.2 percent since March.
The increase in housing starts have been helped along by the decreasing price of lumber, which dropped to a composite price of $321/per 1,000 board feet at the beginning of May. With lumber prices going down, it makes the cost of building a house cheaper, therefore leading to more home starts and houses built.
Let’s switch gears and talk about renting for a second.
According to USA Today via Zillow, April was the first month that rents grew faster than home prices since 2010. To break it down, rent increased by 4 percent to $1,362/month and home sale prices increased by 3 percent to $178,000. This means that while the prices of rentals and homes are both increasing, the former is becoming more expensive at a quicker rate than the latter.
Thanks to decreasing unemployment, more millennials have moved out of their parents’ homes and are currently renting. But, with rent continuing to increase, Zillow’s breakeven horizon rests at 1.8 years, meaning that in a little under two years, a house will be more financially advantageous than renting will be. In short, millennials contemplating investing in a house instead of renting an apartment should take the plunge now.
What’s the Catch?
While seasonal temperatures and market conditions give the green light to millennial first-time homebuyers, the reality is that it is more difficult to buy a house today than it was years ago.
The Catch-22 lies in rising rent, sluggish wage increases and crippling student loan debt. These financial stipulations make it that much more difficult for millennials to save up the money for a down payment on a house. Tight credit standards can also complicate things, especially if you haven’t even started building credit.
By the end of January 2015, the national rental vacancy rate, which measures the percentage of rental property available, dropped to a 20-year low. This is a sign of strong rental sales. In other words, millennials have been saving up and moving out on their own. This is a significant comeback, especially after pioneering the “Boomerang Generation.”
Economists also expect that the housing market will continue to gain momentum throughout the year. Considering low mortgage rates and strong job growth, it’s a possibility that you could be watching HGTV in the comfort of your own home by year’s end.
If you aren’t content living the #ApartmentLife, use the summer to save some money for a down payment. A couple hundred dollars each month can go a long way. To increase your chances of getting a loan when the time comes, follow GenFKD’s tips for building your credit score.
Are you looking to purchase your first home? Share your story in the comments below or catch up with us on Facebook.