The housing market was one of the few shining lights in the past year. Amid the chaos of the global pandemic and recession, the interest rate for mortgages plunged down to its lowest levels yet. Suddenly, more households can afford to borrow money and acquire their own homes.
That was the case for many Millennials. For years, the largest generation was shunned for being well-educated but jobless, for choosing to invest their money on experiences instead of material goods, and for being eternal renters. But, in 2020, those born between 1980 and 1995 were predicted to make up more than 50 percent of all mortgage originations. By August, Millennials were driving a home-buying boom.
The lower interest rate for mortgages played a factor in finally enabling Millennials to acquire their first homes. Borrowers can increase the amount of their home mortgage loans to buy a bigger or better property without paying for exorbitant interest. In the past year, those who took out mortgages while the interest rates were low saved a lot of money.
Challenges of Millennial Home Ownership
However, despite the favorable mortgage rates brought about by last year’s crisis, buying a house was not easy for all Millennials. One challenge that the generation faced in 2020 is the higher cost of owning a house.
Because of the lower mortgage rates, more people became capable of buying a house. However, the pandemic convinced many sellers to postpone their move to protect their loved ones from COVID-19. In addition, 2020 also saw scarcity of lumber which further led to the under-building of houses in the United States.
These factors created a housing shortage that has not been seen for decades. As the law of supply and demand dictates, the median home-sale price increased significantly. One report revealed that nearly half of all homes sold for more than the price listed.
Moreover, because of the shortage, properties were staying in the market for an average of 23 days, the shortest time houses were listed and then sold since 2012.
The market last year was favorable to sellers, but it made buying a house more difficult to aspiring homeowners. Millennials were left with little choice, and the few that are available are selling at a higher price. They were also forced to snap up a property if they want it, fearing that someone else will make a better offer.
Millennials are, once again, facing another housing crisis. This was the generation that was most affected in the housing crisis of 2008. While they were not buying homes by then, they entered the job market in the middle of a recession.
Home ownership was out of reach for Millennials for years. Now that they are capable of buying a house, they cannot because there are no properties to buy.
Will 2021 Be Better?
Now that vaccinations are lowering the number of new COVID-19 cases in the United States, there is hope that sellers who deferred putting their homes on the market during the pandemic will be open to selling their properties now.
Moreover, a representative from the National Association of Home Builders told Forbes that 2021 will be a busy year for people in the construction industry. Over a million single-family homes are expected to be built this year.
The Mortgage Bankers Association also has the same positive outlook for 2021. According to its forecast, single-family housing starts will be around 1.134 million. More will be around by 2022 and 2023.
The youngest among Millennials are approaching their 30s. They now have a steady job, they are getting married, and they are having kids. They now are looking into buying a house where they can start a family. The necessity for new homes will not end in 2021.
Lumber Costs to Keep Prices High
But, before celebrating, there is another looming problem for Millennials who dream of becoming a homeowner: the rising cost of lumber. The prices of the major building material has been increasing since 2020. On April 26, the cost of lumber rose by 325 percent — a record high — to over $1,400 per thousand board feet. Newly-constructed houses will be more expensive by more than $35,000 because of lumber.
In addition, there is also a problem of labor. The industry lost skilled workers because of the pandemic. Many are also refusing to go back because the job is seasonal and physical. This may slow down the construction of new homes.
Contrary to previous beliefs, becoming a homeowner is the dream among many Millennials. In 2020, the low mortgage rates enabled them to afford the lifestyle. However, challenges such as housing shortage and rising cost of lumber are creating obstacles that prevent members of the largest generation to acquire their own real estate property.