4 Mistakes Millennials Should Avoid When Home Shopping!

By
Real Estate Broker/Owner with Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate

A recent survey indicates that Millennials are ready to shop for homes! According to Consumer's Reports, Americans are ready to shop again, but they're proceeding far more cautiously than they have in the past.

I recently had a conversation with some Millennials (aged 18-34) about the real estate market in West Michigan. One of the questions I was asked was if I thought it was ALWAYS a good idea to purchase a home? My answer was no. There are a variety of reasons why a home purchase may not be a wise decision including: a lack of stable employment, significant consumer debt or student loans and the lack of maturity necessary to undertake the responsibility of a home purchase.

However, with rental rates in West Michigan increasing by approximately 5-10% per annum, many are finding that it can be more expensive to rent a home than to own a similar dwelling.

Let's consider an example from a popular west side neighborhood where homes and condos retail for approximately $70,000 - $85,000 for a 2-3 bedroom starter home. The average house payment at current interest rates of approximately 4% and a 3.5% downpayment would be approximately $405 for a 30 year loan. This does not include insurance and taxes which could add an additional $250+. The adjusted housing payment would be approximately $650+.

A similar home in the neighborhood referrenced above, for RENT (if you can find one) would currently retail for $800 - $1,200 depending on location and ammenities.

The bottom line is this in my opinion...

If you are gainfully employed and do not have a staggering amount of student loans or consumer debt, purchasing a home is an option you should consider. Secondly, if you're ready to start building a financial future for yourself or your family, owning a home remains one of the best long term investments available. Here are some questions to ask to determine if a home purchase may make sense if you're in the Millennial Generation.

1. What are the rental options in my neighborhood? What is the average rent?

2. Is the neighborhood you're considering likely to be a good investment in the future?

3. What are the hidden costs of renting?

  • Tax deductions for homeownership - not available for renters
  • Any improvements you personally make to the dwelling benefit the landlord, not you.
  • Condominium association dues - are these your responsibility or the landlords?
  • No potential for equity gains or increasing the return on your financial investment as the housing market improves

4.  Have you thoroughly researched the potential financial options to assist with your purchase?

  • First time home buyer credits
  • Lender approved negotiated assistance with home purchasing costs
  • Tax credit programs for qualified home owners
  • Mortgages with lower down payments or no down payments

The questions above are a good way to start a conversation around the decision to own or rent a home. Another important part of the process is to contact a knowledgeable Real Estate Broker who can help to successfully navigate through the complexities and help to ensure that the right investment is made.

Comments (7)

Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Lola, it makes a lot of sense to consider buying a home if a home can be purchased for a lot less than the going rental rates in the same area. Thanks for sharing this great information for millennials considering buying a home.

Oct 10, 2014 04:55 AM
Sandy Padula and Norm Padula, JD, GRI
HomeSmart Realty West & Lend Smart Mortgage, Llc. - Carlsbad, CA
Presence, Persistence & Perseverance

Lola: I am sure your really surprised the M's when you answered , "No' on the time to buy question. Great way to disarm them and get them paying attention. Hopefully, you are able to cultivate at least one buyer. Good Selling!

Oct 10, 2014 05:34 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Troy, thanks for stopping by to read & comment.  The rental market has been booming due to several factors including a signficant increase in the student population at local colleges/universities and the fall-out from the mortgage crisis as a result of which some homeowners are now renting.

Oct 10, 2014 08:13 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Hi Sandy & Norm, Thanks for your comment.  It's not really a selling tactic. It's simply the truth. I don't think that homeownership is necessarily right for everyone.  Sometimes, it's good to wait and be better prepared to ensure success. I prefer to take the time to help people explore their options to determine what's best for them.

Oct 10, 2014 08:17 AM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Lola - These are very helpful great tips on four mistakes Millennials should avoid when shopping for home.

Oct 10, 2014 08:31 AM
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Thank you John!

Oct 10, 2014 09:00 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Lola, a great post and all is so true!

Dec 14, 2014 11:49 PM