The spring home-buying market is shaping up to be one of the most competitive in recent memory, and is even worse for first-time homebuyers, i.e. Millennials.
The market as a whole continues to struggle with low housing inventory, but a recent report from Trulia shows the dwindling inventory is especially acute for starter homes or even trade ups, while the number of premium homes actually increased.
A report from Freddie Mac shows there is one factor that could hold back home sales as the spring home-buying season starts – affordability, due to rising interest rates and home prices.
And TransUnion’s new survey shows that Freddie Mac's prediction hit the nail on the head, at least for Millennials. As it turns out, there are two factors holding Millennials back from purchasing a home.
The first factor is rising interest rates. Nearly half, 42%, of Millennials decided to delay buying a home after the rate hike in December. Now, the Federal Reserve has elected to raise rates yet again in March, a trend that is expected to continue in the coming months.
However, because rates are expected to continue rising at least over the next two years, Millennials may have to accept higher rates are the new norm. Of course, that might be easier if home prices were not also rising.
The second reason many Millennials are delaying homeownership is because about 38% have subprime credit, according to TransUnion’s consumer credit database.
In that case, there are several steps Millennials can take toward improving their credit scores. TransUnion Vice President Heather Battison passed along these tips that Millennials should consider when preparing to buy a home:
- Check your credit early: TransUnion recommends all homebuyers check their credit report three to six months before shopping for a home to allow time to build credit if needed.
- Talk to your landlord: Renting Millennials should ask their landlord to report existing rent payments to TransUnion and the other bureaus to demonstrate positive payment history.
- Get pre-approved: Knowing the loan size a financial institution is willing to approve can prevent people from falling in love with homes they can’t afford.
- Have a contingency budget: There are a lot of financial unknowns when buying a home so it’s important for homebuyers to have money set aside for any surprises upon move-in.
