Scottsdale homebuyers

After several years on the sidelines, a new report shows Scottsdale millennial homebuyers are finally starting to enter the market. The recently published survey included more than 13,000 homeowners, renters, buyers and sellers and is part of the Zillow Group Consumer Housing Trends Report. The survey shows millennials are participating in the market and, indeed, making a larger impact than originally thought. Half of all buyers in today’s real estate market are age 36 or younger. In addition, half of all sellers are under age 41.

The Zillow Group survey also reveals the young adult Scottsdale millennial homebuyers are instrumental in adding greater diversity to the real estate market and others throughout the U.S. Roughly 66% of millennial homeowners are white, compared to 77% of all homeowners. Millennial homeowners are comprised of Latinos or Hispanics with 17%, African-American homeowners total 10% and Asian or Pacific Islanders comprise 7%.

Scottsdale millennial homebuyers are starting to enter the real estate market

Surprisingly, the new report showed an unusually high number of millennial homeowners live in the nation’s suburbs. Previously, statistics showed millennials gravitated to the metropolitan areas and the conveniences renting close to their jobs provided. The study revealed that 47% of millennials now live in the suburbs.

The transition of millennials into suburbia is more than just a “coming of age.” The rise in popularity is largely driven by the cost of living. The urban or metropolitan living, though hip, trendy and popular was also expensive. The irrefutable laws of supply and demand showed, once again, that as a product becomes popular it also becomes more valuable. As a result, metropolitan home prices have skyrocketed in recent years. A good number of millennials, therefore, have explored greater opportunities in the suburbs. The trade-offs of making the decision to live farther away from their downtown jobs include larger homes and shared amenities in new neighborhoods that feature such attractions as community pools, fitness centers, recreation areas and playgrounds.

Suburbs Attracting Most Scottsdale Millennial Homebuyers

The millennial migration to the suburbs seems like a logical progression for many. Their reluctance to buy their first homes was based largely on the rising costs of housing. The new research unveiled by Zillow shows the current market’s “started homes” are nearly as large as the homes other first-time buyers may move up into – and they cost as much as 18% less. Before we pronounce urban living as a thing of the past, it’s interesting to note that it is still thriving. Statistics show roughly 33% of millennial-aged homeowners live in what can be described as the "urban metropolitan city cores." In fact, millennials living in the metropolitan areas comprise a larger percentage of homeowners of any previous generation of Americans.

While there appears to be more Scottsdale millennial homebuyers in the market than previously thought, it’s not for everybody. Experts say 66% of millennials in the home buying market are also considering renting as an option. Roughly one in three millennials seriously consider renting. The reason? As usual, money. To millennials, buying a home is a huge hassle. Statistics show home buyers spend more than four months shopping for a home to purchase. In addition, after all that time and effort, 32% of buyers end up paying more than they had initially planned or budgeted for. As Scottsdale real estate prices soared in recent months – while home inventory remained at near-record lows – it wasn't unusual for successful buyers to make more than one offer before they found a home. To avoid the large number of rejected offers and to make every effort to adhere to their predetermined budget, many millennials have opted to remain on the sidelines and continue to rent. Again, the reason is purely financial. Of the renters across the U.S., nearly 60% earn less than $50,000 annually. Conversely, home buyers average $87,500 in yearly income. As one real estate expert puts it, “Depending on where they (millennials) live, home ownership may be out of reach.”

Why All Scottsdale Millennial Homebuyers Aren't Ready Yet

With a larger number of millennials venturing into the home ownership arena, the question remains, “Why not all?” As mentioned above, Scottsdale millennial homebuyers are cost-conscious. While often thought of as impulsive and reckless with their spending – as most young people for generations have been characterized – most millennials value their money. During the housing crisis of less than a decade ago, many members of the millennial generation watched helplessly as their families and friends struggled with homes, mortgages, jobs and other byproducts of a nationwide recession. They’ve seen firsthand the effects that job layoffs and foreclosures have had on their families or someone they know. As a result, many millennials have emerged with the mindset that they won’t make the same mistakes that others made. Home buying for them, at least at their young age, is something they should enter into with careful thought and financial planning.

Another segment of millennials have, no doubt, been ill-informed that they won't be able to qualify for a home mortgage unless they have a large enough (20%) down payment. While that goal may still be one of choice, perhaps a larger number of millennials would consider buying if they were made more aware and understood better the low down payment lending programs in today’s market.

Some millennials say they are reluctant to by a home until they are confident their career choices and employment decisions are stable. The thought of buying a home only to put it on the market a year or two later if they get transferred or change jobs seems like more trouble than it may be worth – especially for those who haven't bought and sold real estate before.

Lastly, those of us in the real estate market must also understand that home ownership is not the ultimate goal for some millennials. Those that prefer to take things more slowly – including getting married and starting families – count those financial commitments among decisions they just don’t have to make right now.

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While housing continues to make a steady recovery, the percentage of first-time Scottsdale homebuyers remains very low. At only 32% of all home purchases, first-time buyer totals have fallen to the lowest level in almost thirty years.

Why Scottsdale Homebuyers Aren’t Buying

The percentage of first-time Scottsdale homebuyers remains very low.

Despite market conditions seemingly being favorable for first-time buyers, they simply aren’t getting involved. Low mortgage rates, promising employment opportunities for college-educated prospects, and rising rents ordinarily would signal a ripe opportunity for those looking to buy their first home. However, according to a recent survey, those same increasing rents and higher home prices are hindrances to young couples trying to save money for a down payment. Factor in the scarcity of new and existing homes in an entry-level, affordable price range, and it’s easier to see why first-timers are hesitant to enter the market. Many still think it may be too difficult for them to qualify for a mortgage.

Survey respondents cited debt as the major factor for putting off buying a home. They said too much debt prevents them from saving sufficient money for a down payment. And over half of those surveyed specifically blame student-loan debt.

Ironically, younger buyers still have a strong desire to own their own home. Of first-time buyers that made a purchase, 64% say their primary reason for buying was their “desire to own” rather than rent. That percentage represents an 11% increase from just one year ago.

Repeat home buyers surveyed cited their desire for a larger home as the main reason that motivated them to purchase. Many feel even though home prices are high, the values are rising as well and with interest rates near all-time lows there’s no better time for them to upgrade.

A majority of those surveyed — 80%, in fact — viewed home ownership as a good long-term investment, with 43% saying that home ownership was a better investment than the stock market.

The report was released during which time the U.S. home ownership rate is at its lowest level in 50 years, 63.4%. That rate leveled off in the third quarter of this year, marking the first time since 2013.

Other interesting survey findings were as follows:

Cash purchases still comprise a large percentage of home transactions. While most buyers needed mortgage loans to buy their homes, that percentage dipped slightly. Not surprisingly, roughly 50% of first-time buying prospects cited the mortgage approval process as being more extensive and more cumbersome than they anticipated.

Today’s Scottsdale homebuyers have the highest average FICO credit scores in history. And more borrowers are qualifying for mortgage loans — notably so among middle-income black and Hispanic borrowers — even though they comprise a smaller percentage of the total housing market.

As expected in this technology-driven world, today’s home buyers are utilizing mobile apps and real estate websites more and more to search properties and mortgage rates. They are also making quicker decisions and taking action faster than ever. Statistics show buyers purchase their homes on average in 10 weeks compared to 12 weeks during the period between 2009 and 2013.

What does this all mean for first-time Scottsdale homebuyers? First-timers hesitant to become purchasers need to be more aware of low down payment mortgage programs. In addition, if their credit is relatively good, financing should be available at low interest rates. And, even though home sales prices are high, so are rents. So, they should take a look at purchasing while the time may be right for them.

Get more up to date news and tips for Scottsdale homebuyers by checking out our other articles under the Scottsdale Real Estate News section just below Scottsdale Real Estate Categories to your right.

The effects of a down economy over the past few years has taken its toll on first-time Scottsdale homebuyers. Industry experts cite the inability of young Americans to accumulate savings for down payments and an unstable job market as major reasons. The result is they are sitting on the sidelines longer than ever before jumping into the home buying market.

It is taking longer for young Scottsdale homebuyers to be able to purchase their first home

According to the well-known real estate data source, Zillow, first-time buyers now rent for six years before deciding to buy — more than double the time from a generation ago. And, Zillow says, the average age of a first-time buyer is 33, three years older than their parents' generation which was around age 30.

Financial Challenges Facing Scottsdale Homebuyers

Millenials are having trouble saving sufficient cash to make down payments. But that’s not all. According to Census Bureaus reports they're slower in reaching certain traditional benchmarks such as marriage, having children and career decisions. As a result, homeownership has declined to a nearly 50-year low of 63.4%.

By waiting to purchase, many Scottsdale homebuyers are paying higher prices for their first homes when compared to their incomes. At slightly over $140,000, today's first-timers pay more than 2.5 times their annual income. A generation ago, a first home was roughly 1.7 times a borrowers annual income.

Zillow reports that millennials want to buy, but are forced to wait until they have children. And with rental rates continuing to rise, many prospective first-time Scottsdale homebuyers find it difficult — even impossible — to save enough money for a down payment to qualify for most mortgages. Another factor in waiting to buy seems to be their penchant for job security and stability. Not surprisingly, for a generation that first broke into the labor force during a recession, they recognize the importance of finding, keeping and thriving in a job or profession. As such, the timetable for Scottsdale homebuyers depends largely on employment stability.

Housing experts say this trend will likely continue, as millennials' habits remain unchanged as a result of higher rents and the increasing importance of finding and securing their place in the workforce.

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First time Scottsdale homebuyers are in a trap they can't seem to get out of, and it's called a "Rent Trap."

First time Scottsdale homebuyers seem to be caught in a rent trap they cannot get out of.

Everyone has pretty much come to the conclusion that interest rates won't stay low much longer, and home prices continue to rise. New three percent down programs from Fannie and Freddie sweeten the deal for new buyers. FHA’s mortgage insurance premium cut makes FHA affordable again. Incomes are up.

To top it all off, greedy landlords everywhere seem to be practically pushing their tenants out the door, with rents rising every month. Rent vs buy comparisons show renters how much they are losing by staying put. According to Reis, Inc., the average US monthly rent has climbed 14 percent in the past five years—double the rate of home price appreciation. Rents rose 3.5% last year according to Zillow, which forecasts another 3.5% hike this year. Rents are forecasted to keep rising in 2016, though record numbers of new apartment openings are expected to slow down increases to about 2 percent, according to Zillow.

Renters Not Rushing to Become Scottsdale Homebuyers

In what could be considered a reverse trend, rising rents do not appear to be playing a significant role in motivating renters to become Scottsdale homebuyers. This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home. Rising rents are primarily a sign of increased demand rather than a signal that home purchases will be increasing.

Instead of acting as an incentive to buy a home, rent hikes are keeping renters captive by siphoning off cash that otherwise might have been saved to make a down payment or pay closing costs. Even to save the 3 percent down required of the new Fannie and Freddie programs, it takes two years or more for the average first-time Scottsdale homebuyer to muster enough for a down payment. Every time rent increases, it’s going to take even longer to save enough to become a homeowner.

In the past, renters making the national median income could expect to pay about 25 percent of their income on a typical apartment. Today, renters should expect to spend roughly 30 percent of their income on the median apartment

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95 percent of Scottsdale homebuyers know that credit scores play a significant role when purchasing a home, and those who know their credit scores feel better prepared to buy. This recent data comes from a survey from Experian Consumer Services. In addition, 45 percent of future Scottsdale homebuyers say they have delayed buying a home in order to work on their credit so that they can qualify for a better interest rate on their mortgage.

Many future Scottsdale homebuyers say they have delayed buying a home in order to work on their credit

No one likes walking into a lender's office, whether buying a home or refinancing their current mortgage, and not knowing the state of their credit. The Experian survey shows when people interact with their credit by tracking it and learning more about the factors affecting it, they feel more confident about their buying power.

Experian's survey results show the effect that knowledge of credit can make in the homebuying or refinancing process.

More Scottsdale Homebuyers Know Their Credit Score

According to the survey, 70 percent of Scottsdale homebuyers who know their credit scores feel significantly more prepared to buy a home versus the 54 percent of those who do not know their credit scores. About 62 percent of Scottsdale homebuyers know that their credit scores could mean the difference in the interest rate they'll qualify for when buying or refinancing their home.

The survey also indicated that future buyers are sometimes uncertain about the homebuying process. They are usually anxious about good interest rates, with 41 percent concerned their credit score will cause them to not qualify for the best rate available. Of the respondents that expressed concern about their credit score hurting their ability to buy a home, 27 percent do not even know their credit score. Of those who don't know their credit score, 48 percent are concerned that their score could hurt their ability to become Scottsdale homebuyers.

Actively working to improve their credit score has become a priority for 58 percent of future Scottsdale homebuyers so they can qualify for a better home loan interest rate. Of those who are making an effort to improve their credit score, 55 percent are paying off debt, 54 percent are paying bills on time, 28 percent are keeping credit card balances low, 20 percent are protecting credit card information from fraud/identity theft, and 16 percent are not applying for or opening new credit card accounts.

Seventy-four percent of recent Scottsdale homebuyers indicated they understood the impact a poor credit score can have on getting a good interest rate, but 61 percent know the potential effects of identity fraud on the financing process. Sixty-two percent of future Scottsdale homebuyers are confident about their credit status, and 60 percent feel financially prepared to buy a home.

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