First-time homebuyers are vital to the housing market
First-time homebuyers are vital to the health of the nation's housing market, but they haven't shined much light on the sector in several years. According to Wall Street Cheat Sheet, the percentage of first-time buyers recently dipped to its lowest point in nearly 30 years .
Lawrence Yun, chief economist for the National Association of Realtors, said there's been a slew of reasons why the nation's young adults haven't been able to get into the housing market.
"Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce," Yun said in a press release. "Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions, and high mortgage insurance premiums."
Historically, first-time homebuyers represent roughly 40 percent of the nation's home purchases, according to NAR. Yet in 2014, that number dropped to 33 percent, the lowest share since 1987. Affordability issues are still a major concern despite the housing bubble burst occurring several years ago.
Will young adults bounce back?
Despite certain belief that young adults aren't interested in owning a home, Zillow reported many in the demographic (23 to 34 years old) want to eventually buy a home and are optimistic about their chances .
More than four-fifths of millennial renters - 83 percent - told Zillow they are "confident" or "somewhat confident" that they will eventually buy a home .
Renters in older demographic groups are less confident they will own a home. Sixty-five percent of Generation X renters (35 to 49 years old) and only 48 percent of Baby Boomers (50 to 64 years old) are "confident" or "somewhat confident" they will own a home.
Zillow believes 2015 will be a massive year for millennial homebuyers. The real estate firm predicts cities such as Chicago, Pittsburgh, Las Vegas and Atlanta will be prime markets for millennial buyers, giving the millennial generation the push it needs to overtake Generation X as the nation's largest group of homebuyers.
Yun said it's still difficult for young adults to acquire home financing from a bank or financial institution. Once lending standards become a bit easier, it could open the floodgates for millennial buyers.
"Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years," Yun said.
Lifestyle choices keeping millennials on the buying sidelines
Many millennials are choosing to postpone any plans for marriage or children, which is a big reason why young adults aren't making bigger waves in the housing market. Zillow reported marriage and having children are two of the biggest factors that spur people to make home purchases. However, as the group begins to age, a growing number will settle down and start buying homes.
When the demographic does start to consider buying homes, Fox Business recommends making a checklist and thinking about the long-term nature of a housing purchase .
A checklist helps buyers avoid some of the emotional attachment that comes with seeing a variety of properties. A list can keep people on a more practical path and gives certain guidelines that should be followed: the right price, neighborhood and school district.
Thinking about the life of a home can save a buyer money down the road. Will a particular home hold better resale value than another? Will a poor school district deter buyers at the time of resale? Those are both good questions to consider when purchasing a property.
. Will First-Time Homebuyers Be the Biggest Surprise in 2015?
. 2015: A Big Year for Buyers
. House Hunting With Millennials
. 10 Tips Most First-Time Home Buyers Don't Consider
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