Millionaire to Millennials: Buy a Home!!

Millionaire to Millennials: Buy a Home!! | Simplifying The Market

Last week, CNBC ran an article quoting self-made millionaire David Bach explaining that not purchasing a home is “the single biggest mistake millennials are making” because buying real estate is “an escalator to wealth.”

Bach went on to explain:

“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”

In his bestselling book, “The Automatic Millionaire,” Bach does the math:

“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show appearing more than 100 times, has been a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS, and has been profiled in many major publications, including The New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, The Washington Post, The Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

Bottom Line

Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.

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Student Loans = Higher Credit Scores

Student Loans = Higher Credit Scores | Simplifying The Market

According to a recent analysis by CoreLogic, Millennial renters (aged 20-34) who have student loan debt also have higher credit scores than those who do not have student loans.

This may come as a surprise, as there is so much talk about student loans burdening Millennials and holding them back from many milestones that previous generations have been able to achieve (i.e. homeownership, investing for retirement).

CoreLogic used the information provided on rental applications and the applicants’ credit history from credit bureaus to determine if there was a correlation between student loan debt and credit scores.

The analysis concluded that:

“Student loan debt did not prevent millennials from access to credit even though it may delay their homebuying decisions.”

In fact, those with a higher amount of debt actually had higher credit scores.

“Renters with student loan debt have higher average credit scores than those without; and those with higher debt amounts have higher average credit scores than those with lower student loan debt amounts.”

Bottom Line

Millennials are on pace to become the most educated generation in our nation’s history, with that comes a pretty big bill for education. But there is a light at the end of the tunnel:

“Despite the fact that student loan debt has grown into the nation’s second largest consumer debt, following mortgage, and has created a significant financial burden for millennials, it does not appear to prevent millennials from accessing credit.”

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Think All Millennials Live in Their Parent's Basement? Think Again!

Think All Millennials Live in Their Parent's Basement? Think Again! | Simplifying The Market

According to the Census Bureau, millennials have overtaken baby boomers as the largest generation in U.S. History. Millennials, or America’s youth born between 1982-2000, now represent more than one quarter of the nation’s population, totaling 83.1 million.

There has been a lot of talk about how, as a generation, millennials have ‘failed to launch’ into adulthood and have delayed moving out of their family’s home. Some experts have even questioned whether or not millennials want to move out.

The great news is that not only do millennials want to move out… they are moving out! The National Association of Realtors (NAR) recently released their 2016 Profile of Home Buyers and Sellers in which they revealed that 61% of all first-time homebuyers were millennials in 2015!  

The median age of all first-time buyers in 2015 was 31 years old. 

Here is chart showing the breakdown by age:

Think All Millennials Live in Their Parent's Basement? Think Again! | Simplifying The Market

Many social factors have contributed to millennials waiting to buy their first home. The latest Census results show that the median age of Americans at the time of their first marriage has increased significantly over the last 60 years, from 23 for men & 20 for women in 1955, to 29 & 27, respectively, in 2015.

Those who went to college and took out student loans are finally paying them off, as the terms on traditional student loans are 10 years. This means that a large portion of the generation is making its last loan payments and is working toward saving for a first home.

As a whole, the first-time homebuyer share increased to 35% of all buyers, up from 32% in 2014. Not all millennials are first-time buyers, they also made up 12% of all repeat buyers!

Bottom Line

Millennials will continue to drive the housing market next year, as well as in the years to come. As more and more realize that owning a home is within their grasp, they will flock to own their piece of the American Dream. Are you ready to buy your first or even second home?

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2 Myths About Mortgages That May Be Holding Back Buyers

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

Fannie Mae’s “What do consumers know about the Mortgage Qualification Criteria?” Study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home. New programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at the latest Ellie Mae Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.1% of approved mortgages had a credit score of 600-749.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.

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‘Old Millennials’ Are Diving Head-First into Homeownership [INFOGRAPHIC]

‘Old Millennials’ Are Diving Head-First into Homeownership [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • ‘Old Millennials’ are defined as 25-36 year olds according to the US Census Bureau.
  • According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 31 years old.
  • More and more ‘Old Millennials’ are realizing that homeownership is within their reach now!

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What’s Happening in the Real Estate Market?

What’s Happening in the Real Estate Market? | Simplifying the Market

This is a pretty common question that a potential home buyer or seller may be asking themselves. Leading economists in real estate converged in New Orleans this past week as they presented their answer to this question at the 50th Annual Real Estate Journalism Conference for the National Association of Real Estate Editors.

Here are the top takeaways from the week of presentations:

Many of the conversations at the conference came back to the impact that Millennials and first-time home buyers will have on the market in the future. Jonathan Smoke, Chief Economist for realtor.com had this to say: 

“At any given time in our history, demographics would explain 60-80% of what’s happening [in the market], and we are in a period of time where Millennials make up a largest demographic group according to the Census, at 84 million.”

According to the National Association of Realtors (NAR), the median first-time home buyer age is 30 and many millennials are entering a prime age to drive the housing market into the future.

Lawrence Yun, Chief Economist for NAR shared that myths and affordability may be holding back potential buyers:

“84% of current renters have the desire to own. While 36% believe they cannot afford a home and 60% of renters believe it would be ‘difficult’ to qualify for a mortgage.

Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage: 

“Many potential home buyers are ‘disqualifying’ themselves. You don’t need a 750 FICO Score and a 20% down payment to buy.”

The National Multifamily Housing Council (NMHC) revealed that Millennials and Baby Boomers are often competing for the same housing inventory, causing a challenge as these two groups are the largest generations by population.

Both groups are looking for affordable, convenient homes close to city centers and ‘what’s happening.’

Bottom Line

The experts agree that homeownership is still desirable across all demographic groups, with Millennials and Baby Boomers having a great impact on available supply. If your dreams include owning your own home, let’s get together and evaluate your ability to buy now!

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