Five Points to Consider About the Current Housing Market
- Student loan debt is a problem for many – not just Millennials – when it comes to buying a home.
Those looking to purchase a home should start planning early to determine what they can afford based on their debt, their income and their credit picture. John Horton, Vice President and Senior Residential Lending Manager for Associated Bank in Chicago, said debt is a factor many are having to consider.
"A lot of millennials are having a difficult time purchasing a home, because, number one, of student loan debt," Horton said. "They're graduating college, they have student loan debt and they have a car payment – it could blow them out of the water."
Starting the conversation with a lender early is key, he notes.
"So really picking up the phone, seeing what you have, running the numbers – you can do it without pulling credit – we will give a … consultation …," Horton said. "You might not hit everything, but you'll get a nice ballpark on what you might be able to afford."
Millennials aren't the only ones with student debt. Baby Boomers and Gen Xers have it too.
"Right now … your Baby Boomers' average student loan debt right now's about $10,000, Gen X is about $30,000 and Millennials are averaging about $25,000 in student loan debt," Horton said.
- Gen Xers have more to worry about than just loan debt.
Not only does Generation X have potentially the most student debt compared to other age groups, but they were also hit by the 2008 crisis the hardest, Horton notes.
"They were hurt the most because they bought … (houses) right before that happened," Horton said. "They were affected by the job loss, by the housing crisis, by the lower sales prices, and it's hard for those Generation Xers, it's harder for them to move now than anybody else, simply because of where they're at and what they were caught in."
Those who experienced the housing crisis firsthand now tend to be more tentative than others in the housing market.
"They do, it's almost like they're retreating from the home-buying arena, because they were burnt so bad," Horton said. "A lot of them are starting to come out of the weeds, they're starting to see that things have leveled off, that prices are going up. … I think the more they do it, you're going to see kind of a little wave. The more that do it, they'll talk to friends, they'll talk to family. But it's absolutely one of the generations that got hurt so bad. 401ks were wiped out, stocks were wiped out, housing was wiped out. That's a hard thing to bounce back from."
- People who are buying expensive homes are doing so for the school systems and the rest of the area – not just for the house itself.
In Chicago – and across the country – people who are purchasing higher-end homes are doing so for the whole package; they're buying not just a house but also the neighborhood schools and the community that goes with the house. In Chicago, people are moving to the western suburbs, Horton notes, looking for good school systems and all the other amenities of a thriving, affluent community.
"You're finding a lot of the younger folks that want the school system for their children in the suburbs moving out to western burbs such as Elmhurst, Clarendon Hills, Hinsdale … those new construction houses, million-dollar homes," Horton said.
"Depending on the area, you'll find some that are 4,000, 5,000 square feet that are $1 million, $1.3 million, but you're really paying for your area," Horton said. "You're paying for the schools, the fire departments, the libraries, convenience. The reason Elmhurst is a big push, it's close to the city. You have a beautiful downtown in Elmhurst, you're real close to the expressway … (and the train). So you're kind of getting the best of both worlds, you're living in the burbs but you have access to the city for employment or weekends or whatever you need it for."
- Lower-priced homes are good fixer uppers.
Maybe you can't afford the higher-priced home of your dreams. The up side is that lower-priced homes are out there, and they make for great renovation projects.
"There's bargains," Horton said. "You do see a lot of people, a lot of older people that are either retiring or downsizing that have lived in their homes (a long time).
Whatever the motivation for needing to pay less – or wanting to take on a project – a lot of those old homes do have good bones to work with.
"They're well built, but they might need a little bit of updating," Horton said. "The shag carpeting and the tile on the ceilings might need to go. But what you're saving in the purchase, you're going to make up for in the remodel."
- Buying a home is still part of the American Dream.
"It's actually still one of the American Dreams," Horton said. "It's the Gen Xers – that's still the number one thing they want to do, they want to own a home. And it's also funny, the people with homes larger than 2,000 square feet want smaller homes; the people with homes with less than 2,000 square feet want bigger homes. So you're finding those people that want to sell the big homes, you have people that want to buy the big homes and they're selling smaller homes, and if you could match those people together it would be perfect."
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