For some years now, real estate industry experts have noted that millennials have been very slow to make their way into homeownership. However, according to recent information from Washington DC area real estate agents, this trend may be on the verge of changing. Rising rent may be forcing millennials to look into homeownership.
Rent in the DC Area
Washington DC is growing. In fact, more than 1000 people move to the area every single month. Thanks to an increased demand for housing and a limited supply, both homeowners and landlords are capitalizing. Home values increased over 36% between 2016 and 2017 thanks to supply and demand, but it isn’t just investors and potential homeowners who are feeling those effects. Landlords and property owners who want to make the most of the current housing situation have started raising rents all over the area, and some real estate agents claim their millennial clients have finally had enough – they are ready to buy.
Homeownership vs. Renting at the National Level
In the last year or so, the cost of rent across the nation increased by 4%, and while that may not seem like much at first, when rents increase by 3%, 4% or even 5% for many years in a row, this adds up. Millennials, like many others, simply want what is best for their needs for the long term, and that is exactly why there has been a significant increase in the number of millennials applying for mortgages. A 30-year fixed-rate mortgage offers much lower monthly payments than rent, especially in places like DC. What’s more, those payments build equity – something that eludes renters.
A Recent Survey
Toluna Research conducted a survey on behalf or Realtor.com of about 1000 people who were actively buying homes in early March of this year. Of the millennials who responded, 23% said that they were actively searching for and buying homes because of the swiftly increasing cost of rent. HUD data showed that rent costs had increased substantially in 85 out of the top 100 metro areas in the country. Staggeringly, there were nine heavily populated metro areas where rent had gone up by 10% or more in a single year. These increases are tough to digest, especially for younger generations.
Ready to Settle Down
Finally, there are other factors likely leading millennials into homeownership outside of increasing rents. For example, over the last year or so, mortgage interest rates have climbed slowly but surely, and industry experts say they will continue to climb into the foreseeable future. Younger generations see this and realize that it’s truly now or never if they want the best possible rates and the lowest possible payments, and this is also driving homeownership in many markets across the country.
The rising cost of rent is problematic all over the country, and that’s especially true in markets like the DC Metro, where housing is limited but demand is high. Millennials are buying homes more often these days, and while it is at least partly due to increasing rent, increasing mortgage interest rates and the desire to invest are likely driving these purchases, too.