The young and the resting: Millennials are waiting longer to buy their first home

Chelsea Armbrustmacher has recently purchased her first home along Donna Drive in St. Joseph. She is one of the many millennials who waited a long time before buying a house. (Don Campbell | HP Staff)

Chelsea Armbrustmacher has recently purchased her first home along Donna Drive in St. Joseph. She is one of the many millennials who waited a long time before buying a house. (Don Campbell | HP Staff)

By Tony Wittkowski | Business Reporter | The Herald-Palladium

ST. JOSEPH — Buying a home is a complicated process that is considered by most financial advisers to be the biggest undertaking in a person’s adult life.

That is just one of the reasons why millennials are waiting longer than most generations to buy a home.

The Great Recession, which began in December 2007 after losses on subprime mortgages battered the U.S. housing market, is another factor in slow housing sales for millennials. Coupled with a steady increase of student debt, the housing crisis left more young adults unwilling to invest in a home and build equity. Millennials, a label applicable to adults ages 18 to 34 as of 2015, have been unable to establish themselves in a community long enough to start saving the necessary funds to buy a home.

Chelsea Armbrustmacher has been renting an apartment since she began nursing school, but bought her first house Sept. 30.

She is 27 years old.

The St. Joseph resident made the decision after hosting a few family members one weekend this summer. Armbrustmacher managed to squeeze her three aunts, mother and grandmother into a one-bedroom apartment. It was one of those aunts who convinced her to begin searching for a permanent home.

She looked at houses on a weekly basis for the next two months and discussed what she liked with her real estate agent, lender and family. Then she found it.

“It was very overwhelming, to be honest with you,” she said. “I had no clue what I was doing. I had a price range, but I didn’t realize until I started looking that you need to look at the condition of the houses or how old they are.”

Before she began working as a nurse at Lakeland Regional Medical Center, St. Joseph, Armbrustmacher wasn’t sure where she would live upon graduation. She attributes this uncertainty as to why she waited until she was nearly 30 to buy a house.

The trend can be seen in many young adults, who need more time getting the necessary education and skills before they can become self-sufficient. Some of the delays may reflect changing social norms, as millennials are delaying marriage and having children.

“I actually thought it would happen sooner,” Armbrustmacher said, in relation to buying a house. “I mean, I thought I would be married and have kids by then, too. But life kind of happened, so I decided I’m sick of renting. It was time to put my money into something I own.”

Gary Walter, executive vice president of the Southwestern Michigan Association of Realtors Inc., said another factor as to why millennials are not buying homes as soon as previous generations is because of how stringent it has become to qualify for a loan.

Unlike the period before the 2008-09 recession when anyone could secure a loan from banks, there is more scrutiny and the appraisal process has been tightened.

“People who are tempted to purchase a home need to have good credit (and they) need to have a source of income to repay the loan,” Walter said. “… Purchasing a home is probably the largest financial transaction anybody is going to make. I can see why some folks are a little concerned. However, we are seeing the rental market become pretty tight.”

Staying put

Adults under 30 are typically the most mobile part of the American work force.

That mobility has been seen as an advantage for the U.S. labor market when compared to other markets. However, that share of the work force has diminished.

The latest census data shows 3.1 percent of Americans from 25 to 29 relocated in the last year between states – just half the share of 2002.

According to the Population Reference Bureau, moves between counties in the same state have increased some, but remain below pre-recession levels.

This data leads housing experts to believe millennials will find ways to stay put by buying a house and provide a huge boost to a sub-par housing recovery. There is already evidence this is occurring to a small degree.

Being a homeowner is new for 29-year-old Eric Becker. He closed on his first house Sept. 24 and moved in the following weekend.

Becker said he finally made the decision because he was stationary for the first time in five years. The St. Joseph resident is now a quality manager at Whirlpool Corp., but before that he was moved around the country by the appliance maker from Iowa to Georgia and back to Michigan. With a long-term outlook with Whirlpool in sight, Becker felt comfortable investing in the area.

“The overall process (of buying a house) was surprising,” he said. “Early on I didn’t think I could afford a home based on what I earned. It was very unclear to me on the possibilities out there.”

Becker said he hasn’t had to worry about student loans because he got a full-ride scholarship when he left for college. However, he still feels the fiscal pressure from standard credit card bills and payments on his truck.

Playing it safe

One of the dangers Becker says millennials will have to come to terms with is borrowing money.

“Owning a home is not as difficult as some people may think,” he said. “First-time home buyers should find something in a reasonable price range. You’ll get approved for a lot more that you might be ready for.”

Mark Mawhinney, an associate broker at Pier Realty in St. Joseph, agrees with the sentiment.

He said he has seen a dramatic difference in the new generation of home buyers, and picking what is affordable is one of them. In his experience, student debt has been the main cause for preventing the younger generation from buying that first home. Mawhinney said millennials can also be a bit picky when it comes to their first home as they are not always willing to go the extra mile in fixing up a place.

Mawhinney said younger buyers often can’t look past the condition of the house and try to pay extra for one that isn’t as damaged. He said if millennials focus on a fixer-upper, the reduced price will make a difference.

“I’m a Baby Boomer, so we were about working hard and making a house pretty,” he said. “Many young folks either don’t have the ambition or drive to do that. They expect the house they buy to be more pristine instead of adding value to it.”

Contact Tony Wittkowski at twittkowski@TheHP.com or (269) 932-0358. Follow him on Twitter: @tonywittkowski.

(Author’s Note: This article was originally published on Oct. 11, 2015)

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