I■ By Matt McPherson / Columnist
n contrast to reports by many experts about millennials avoiding the real estate market, they are now making up the majority of home buyers. In this very competitive home market, Ellie Mae, a loan origination software and solutions firm, reported that millennials made 45 percent of all home purchase loans in January, up from 42 percent from January of 2016. A surge of more millennial buyers are expected in the spring buying season.
Although lenders have created some hurdles in the form of stiffer lending restrictions, low interest rates and first-time buyer incentives continue to draw young buyers to the housing market. One major obstacle for many first-time home buyers are rising rent and home prices, which pose a significant challenge for people establishing their careers in an effort to save for a down payment.
Buyers who were unable to purchase a home last summer make up the largest opposition to the millennials as both groups sit poised and ready to snatch up property as soon as it hits the market. Frustration from low inventory and fierce competition among buyers continues to drive prices upward. Starter homes seem to be selling the fastest with first-time home buyers making up the majority of home purchasers.
In February, 3 percent fewer homes were available on the market nationwide compared with last year at the same time. Low inventory remains the primary factor driving prices up 7 percent nationwide and almost 20 percent in Hemet and 14 percent in San Jacinto. The low end of the market appears to be fueling vicious battles over property that is commonly selling above list price. In many cases properties are selling within three days from hitting the market and usually above market value. All of these issues can be directly related to low inventory and increased demand.
With rents on the rise and a majority of monthly income going toward housing expenses, buying a home is becoming more and more practical. Mortgage payments are actually significantly lower than rental payments on homes right now. This is causing many millennials to engage in frugal lifestyles, subsequently initiating credit building and down payment saving.
Here in the San Jacinto Valley many buyers encounter a lack of inventory which results in numerous offers on each new listing. Recently a fixer home in the East Hemet/Valle Vista area along the riverbed was listed at $199,000 and after over a dozen offers sold for all cash at $215,000. Lauren, the buyer for this property, understands the importance of overbidding on such a desirable flip property, considering she’ll be able to sell it for a significant profit given the current rise in properties nationwide and especially locally here in the valley.
Another hot market here in the valley is the condo/townhome market in such communities as Lincoln Town Homes. Logan, a millennial buyer, has been very proactive in securing a property within this desirable community, but was recently outbid after he offered “only” $3,000 over the list price. An investor outbid him and offered all cash to win the bid for the property.
Extreme competition among a whole new group of buyers and existing savvy investors, combined with a severely low inventory, persist in driving prices skyward. Low interest rates and first-time buyer incentives continue to fuel the buyer’s market, while it continues to increasingly become a seller’s market. Also make sure you have received your pre-qualification – or even better – your pre-approval letter from your lender and have more than enough capital saved up before you start making offers. A pre-approval letter and bank statement are necessary when making most offers and a necessity in the current market. All these situations make it very important that you contact a local realtor experienced in the San Jacinto Valley home market, who understands what is necessary to secure a property once it hits the market.
Matt McPherson is a licensed real estate agent , BRE # 01362837. Reach him at (951) 315-7914 or McPhtown@aol.com.