If Generation Y is to blame for holding back a housing recovery, as has been suggested in national reports, local real estate salespeople aren’t seeing it.
In fact, despite McHenry County home sales falling 13.3 percent in July, demand locally continues to outpace availability, area real estate experts say. And those in the 18- to 34-year-old age group are playing a key part in that. If anything, they’re often being edged out by investors who’ve jumped back into the market and tend to outbid them.
Certainly, McHenry County is not immune to the sorts of scenarios that have sparked many millennials nationwide to delay their entry into the housing market. High debt-to-income ratios, a lack of established credit or poor credit and the plain old financial appeal of continuing to bunk with mom and dad as a young adult all are factors.
Pundits also say millennials are reluctant to buy because of the notion that home ownership no longer is a sound investment.
“I don’t see that,” said Gail Plunkett, broker and manager at Coldwell Banker in Crystal Lake. “I think our biggest problem is that the first-time homebuyers are competing with flippers, investors, people who can pay cash.”
Plunkett and others said homes in the typical first-time buyers price range of about $200,000 or less are receiving multiple offers almost the instant they hit the market. Occasionally investors will offer more than the asking price, she added.
Millennials who are committed to their quest will realize success. But it often takes patience, effort and some faith in agents’ educated advice, said Rob Schaid, managing broker and owner at Re/Max Plaza in McHenry.
“It has a lot to do with whether or not they’re willing to work,” he said, noting he has not found young buyers to be particularly risk-averse, though he’s aware of many who’ve found it convenient to remain home with parents.
“Many younger people do want to buy, and they are buying,” he said. “When you get under $150,000, though, it’s a very competitive marketplace and there aren’t enough homes.”
Low offers are not succeeding, Schaid added, and many first-time buyers tend to test those waters.
“They don’t listen to us as to what they should offer for a house until they lose one or two,” he said.
Another factor that holds some younger people back from entering the home-buying marketplace is a lack of awareness of just how little it can take to become an owner versus a renter.
Home State Bank Division President Greg Grojean and Mortgage Sales Manager Brad Harding said many programs exist that put home ownership well within reach of those who can’t afford the conventional 20 percent down.
Many, too, are discouraged not only by recent years of sliding values, but by what they’ve heard and read of the increased difficulties of qualifying for a mortgage, Harding said.
“Many believe they have to have 20 percent down and a credit score of 740 or better, and that’s just not accurate,” he said.
Grojean said student loan and other debt definitely affects the amount of a loan for which a person can qualify, as well as their ability to save for a down payment. However, home values are trending upward, while borrowing rates remain low, and programs like FHA can put buyers in homes for as little as 3.5 percent down.
“Combine that with the fact that mortgage interest is tax deductible, and there’s nothing deductible about rent,” Harding added.
Down payment assistance programs also exist, the bankers said. The Illinois Housing Development Authority is providing forgivable assistance to qualified buyers of up to $7,500, or $10,000 for qualifying veterans returning from duty.
Private programs also exist. In fact, Home State Bank offers its own down payment assistance program for first-time homebuyers of up to $8,000. Grojean said the bank provided $85,000 in down payment assistance through its “A Helping Hand” program last year, and has provided more than $100,000 this year, with another $40,000 pending.
Schaid and others noted that waiting might prove to be unwise for those who can afford to get in the game now.
According to a National Association of Realtors’ report, Gen Y comprises the largest share of homebuyers at 31 percent. And interest rates remain historically low at 4.25 percent to 4.5 percent.
“The baby boomer generation is smaller than Gen Y,” Schaid said, referring to total population. “When that generation wants to downsize, they’re going to be after the same housing as first-time homebuyers … get out there and start looking now before your friends do.”