New Options for Millennial Home Buying
Maybe I get Millenials because I didn't buy my first place until I was in my late-30's. It was roommates in New York - I lived in a Stew Zoo for a bunch of years, and it was even rent controlled. Then, when I came to Washington, I rented until my building went condo.
So I can relate to so many of the younger buyers who are in no great hurry to jump in. But when they do, Amy Kramer's post can help you get them off the dime!
Millennials have been slower to purchase homes than previous generations; in fact the home ownership rate dropped to 62.9% in the 2nd quarter of this year— the lowest in more than 50 years. But according to an article I recently read on CNBC.com:
"62% of millennials are renting or living with roommates but almost 90% want to be homeowners"
There are several reasons floated for this phenomenon:
- The 2008 housing bubble burst hurt millenials' parents very hard (albeit most temporarily); thus making their children more skeptical about housing as a good investment;
- Since the economy was bust at that time many millennials graduated, they had a much harder time of getting their first jobs delaying career starts, and;
- Many millennials are entrepreneurs of some sort; prioritizing job satisfaction and creating a perfect job environment over optimizing their home environment.
With many millennials wanting to pursue the dream of home ownership; an old purchase model has resurfaced again with a modern twist.
The old rent to own model has grown into a lease with an option to buy program. Home Partners of America (HPA) is now showing up in growing housing markets with the option to buy a home for a willing lease customer. In Austin, we are seeing great success with this program; and although skeptical at first, I think this program shows great promise.
Here is how it works:
- Consumer wants to lease a home; with the idea they might want to purchase it in the next three years:
- Consumer works with Realtor to search homes for sale (not lease) in their desired area;
- Consumer gets a quick preliminary approval on-line through Home Partners of America via their Realtor;
- Once a home is chosen, a formal lease application goes in and Home Partners approves lease and provides lease terms to consumer. If agreed upon;
- HPA works with Realtor to buy the home;
- If the home is purchased, the lease begins;
- And the consumer can buy the home at any time during the three year period or lease on a year to year basis for three years. The consumer has option to renew lease each year for 3 years...or leave and move on.
Why HPA works:
- HPA are all cash buyers which is key to getting homes in the competitive market in and around Austin;
- You can get into a purchase home instead of a lease home; and Home Partners will only buy homes in exemplary school districts;
- You know how much your lease payment will increase each year for the three years upfront and;
- You know how much your home purchase price will be each year for the three years upfront, nothing hidden.
This program seems to be ideal for:
- Those with lower credit scores down to 525 (this gives them time to get their score up prior to purchase);
- Those who want to get into a home now; and still need to save up for the down payment;
- Those who want to buy a home but don't know how long they'll be in town for
- Homes in great school districts with a purchase price between $200-$500,000.
If you are wondering if this program is for you, give me a call! I'd love to help you find your dream home! I love working with first time home buyers and this program may be for you.
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