Subject Line Ideas: Out of the basement
Fed waits with rates

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Feature Article:Out of the basement

Critical Reads:Fed waits with rates

The Funnies: No thanks, Owen

Home sales in the United States are surging, up more than 5 percent last month (see the Critical Reads article below). There are several reasons for this, including rising demand caused in part by the fear of rising mortgage rates in the coming months. But the sales frenzy has also been spurred by a return of first-time buyers to the market, and some of them – gasp! – include members of a group whom the “experts” all but wrote off as home buyers.

If you’re ready, let's dig in...

Out of the Basement

One of the reasons that real estate’s recovery languished for a while was that a traditionally large group of buyers just wasn’t buying.

That group was first-time homebuyers, who seemed to be sitting out the recovery after making up 51 percent of all sales in 2010 – a year with stats a skewed by an expiring first-time buyer tax credit. Still, the traditional average of about 40 percent hasn’t even been approached since.

There are plenty of opinions on why this was the case. You could easily make arguments that higher mortgage qualifying standards after the foreclosure crisis had a big effect. Higher down payment requirements – also in place for years – have a bigger impact on first-timers as well. But the explanations from quite a few “experts” included reasoning that went beyond the nuts-and-bolts, dollars-and-cents facts facing first-timers.

There was this idea that the generation known as Millennials, those between 18 and 35-years-old – a big chunk of the typical first-time age group – not only couldn’t buy homes but didn’t want to.

We were sold this vision of Millennials hunkered down in their parents’ basement, with crippling levels of student debt would make in next to impossible to buy a home. Income growth didn’t look great, so recent college graduates were putting off household formation, both renting and buying.

But we were also sold another idea: that these basement-dwelling mid-20s types not only couldn’t buy a home, but didn’t want to buy a home, either.Homeownership was just another drag. Millennials want mobility. Millennials want urban living, where they can walk everywhere. Nobody can afford to buy a home but who cares, nobody wants to.

Except that May sales of existing U.S. homes jumped by 5 percent, and 32 percent of those sales were to first-time homebuyers. That’s the largest percentage of the market first-timers made up since 2012. Welcome to the recovery, first-time buyers.

And according to a National Association of Realtors news release, “Millennials have pulled ahead of the older Generation X as the largest segment of purchasers.”

Read that again. Those basement-dwellers with stagnant incomes, staggering student-loan debt, and no desire to own homes are now the largest segment of purchasers.

Here’s a very illuminating paragraph from a Bloomberg News piece on the Millennial uprising:

A Realtor.com survey of site visitors taken in mid-June showed that about 65 percent of respondents between ages 25 and 34 said they intend to buy a home within the next three months, up from 54 percent in January.

This isn’t a very scientific survey. Obviously, visitors to a real estate listings site are going to be more inclined to answer positively about wanting to buy than the general population is. And you’d expect to see June numbers higher than January’s when the choice is “in the next three months.”

Still, the numbers are indicative of at least one thing: Ease those financial barriers to homeownership, and Millennials will buy. From the Bloomberg story:

Young buyers, traditionally top drivers of housing demand, are helping to bolster the U.S. housing recovery after years of being hampered by student debt and tight credit. An improving economy, surging rents and the prospect of higher mortgage rates are luring in more homebuyers, especially older Millennials starting families.

There’s nothing in there about wanting mobility. There’s nothing in there about urban living or walking to work. Heck, the older Millennials are apparently even starting families, which we were told was going to be put off, like, forever.

Now that it’s a bit more realistic financially, Millennials are finally buying. And that shouldn’t come as a surprise.

Contrary to what we’ve been told, they weren’t going to stay in the basement forever.

Why Home Sales Are Surging

In case you hadn’t heard, the National Association of Realtors announced existing home sales figures for May, and sales volume is way up. There are several reasons factoring into real estate’s rapid re-growth, and this Associated Press article, via Yahoo! Finance, explains why home sales are surging so much.

Pirate Party Power

What many people might not know about Iceland is that it’s one of the most conservative developed countries in the world, with right-wing parties in charge for all but four years since World War II. But now, polls are indicating a shift away from the incumbent right. However, it’s not the traditional left-leaning parties that are gaining big support; it’s a brand-new party. The Pirate Party, according to this DailyKos.com article.

7 Creative Ways to Save for a Down Payment

Most down payments on the purchase of a home come from two places: a household’s savings account and/or gifts from family members. Even with lower down payment programs returning to the market, however, a down payment is still sometimes a barrier to home ownership. This Movoto article gives you seven creative ways to save money toward a down payment – ways you might not have thought of on your own.

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