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.