According to the National Association of REALTORS®, Millennials make up the largest share of home buyers in the U.S. In 2020, Millennials, defined as those born between 1981 and 1996, account for more than one in five residents of Virginia. This generation includes the bulk of first-time home buyers, as well as many potential move-up buyers in the market. COVID-19 and the economic recession have led many potential home buyers to press “pause” on their home buying plans. Will Millennials feel financially secure enough to move forward on home buying plans in the weeks and months to come?
The challenges over the past 12 years have left many Millennials on precarious financial footing. While all generations have been impacted by the two most recent recessions, Millennials have had the unique experience of dealing with economic setbacks at key points of starting their careers and families. The average Millennial was 22 years old in 2010 and faced what was the worst employment prospects in generations. The result was higher unemployment, slower wage growth, and rising student debt as young adults were leaving high school and college and looking to start out on their own.
Now, ten years later, as Millennials are reaching the age when prior generations had been achieving the milestones of marriage, childbearing, and homebuying, they are now dealing with the economic fallout of the coronavirus. At the same time, home prices in many markets have reached levels that are increasing putting homeownership out of reach for some Millennials.
According to research from Realtor.com, Millennials may have to delay homeownership because of challenges in coming up with a down payment. According to their analysis, if Millennial renters have to dip into their down payment savings for several months during this economic downtown, their transition to homeownership could be delayed by years.
Despite the challenging economic conditions, there are several positive indicators that suggest that Millennials will be strong force in Virginia’s rebounding housing market:
- While mortgage rates spiked after Friday’s jobs report, overall, the rate on a 30-year fixed-rate mortgage is expected to stay at historically low levels, which will provide an important incentive for first-time home buyers looking to get into the market. On the down side, some lending requirements have become stricter, which could leave out some buyers with less-than-stellar credit or insufficient resources for a down payment.
- Between March and April 2020, Virginia lost 383,400 jobs and the statewide unemployment rate hit 10.6%. While these numbers are staggering, the job losses in Virginia have been highly concentrated in a few sectors of the economy. Millennials with jobs in the Professional & Technical Services, Financial, Manufacturing, and Government sectors have been relatively insulated from job losses during COVID-19. Therefore, many Millennials will be in relatively good financial positions and will be ready to buy a home.
- A result of the COVID-19 pandemic, there could be more people looking to move out of big cities and into smaller communities. The ability to work from home may make living outside of major employment centers more attractive to Millennial families. Looking to buy outside of the state’s more urban areas opens up more affordable choices for first-time home buyers.