Having witnessed the devastating effects of the recent recession on their parents’ and grandparents’ financial situations, Millennials (defined as those between the ages of 18 and 34 in 2015) are reportedly saving earlier and in greater amounts proportionately than either of the past two generations, according to Pew reports. But despite great efforts to save, they face crushing school loan debts, rising costs of living, and pay that isn't keeping up with inflation. With an average home price now well over $200,000 and an average income of less than $35,000, Millennials who want to pursue the American Dream of homeownership are facing some challenging budgetary math.
That kind of math helps to explain why over a third of Millennials still live with their parents. Larger numbers live with roommates. Millennials just aren't in any rush to buy homes and, given the real estate pains they just witnessed their parents suffer through, numerous surveys show that they don't share their parents’ concept of homeownership. Owning a home to many Millennials represents a burden both in terms of maintenance costs and limitations on geographical flexibility.
Nobody knows geographical flexibility better than military families, though. A quick look through MilitaryByOwner's property listings reveals thousands of listings that successfully find either tenants or home buyers when the military requires geographical flexibility in a PCS. It is possible to successfully own a home despite having to move for work. Military families do it every single day.
1) Easier access to home loans with little to no down payments.
With average incomes of less than $35,000, it's a challenge for civilian families to raise enough funds for a substantial down payment. There are low cost home loans available to them, such as an FHA loan, USDA loans, and some state programs that offer low down payments or down payment assistance. Military families, meanwhile, have access to historically low interest rate VA loans that don't require the hefty PMI fees that FHA loans do. You can get pre-qualified for a VA Home Loan through MilitaryByOwner’s partner Veterans United.
2) Higher incomes than their peers at an earlier age.
The U.S. Census Bureau shows that almost 30 million of over 70 million Millennials earn $10,000 or less per year. The top one percent of earners this age bring in just over $106,000 per year, and the majority of that one percent are lawyers, doctors, and software developers. The former two (and sometimes the third group) come with high student loan repayments that prevent them from immediately investing in real estate. Meanwhile, when accounting for BAH, many military O-3s earn between $80,000-110,000 and aren't burdened with the same student loan costs, particularly if they had ROTC scholarships or attended one of the Academies. An E-6 with 10 years in who is stationed in the DC area could earn approximately $70,000 per year. These incomes are substantially higher than that of the average millennial.
3) The benefit of time.
The economy is still recovering. Those who lost their homes are still struggling to recover their credit and don't have easy access to financing, and particularly not at a good rate. Home interest rates are liable to rise later this year, according to predictions from the Federal Reserve. When interest rates rise, rental rates will rise accordingly, too. If you buy early before house prices and interest rates rise again, you can set yourself up for buying a house that’s long paid off before retirement.
So, while civilian Millenials may eventually catch up in earning potential, the combination of zero down payments that allow for home buying at an early age, higher than average incomes, and (for the most part) lower student loan burdens create a great opportunity for military Millenials to invest real estate
Obviously, every military family has a different situation, so make sure to consider How Much House Your Family Can Afford to help determine if investing in real estate is a good idea for you.
photo credit: Iclulig/ DollarPhotoClub