A recent report released by MoneyWise shows that many metropolitan housing markets are becoming increasingly expensive, deterring millennials from purchasing homes. As the cost of living rises in these areas, millennials are forced to rent or purchase in less attractive areas, some with a considerable commute.
With metropolitan cities, such as, San Diego, Los Angeles and Sacramento cited as the most unaffordable cities in the United States, what economists refer to as “affordable cities” are not too far behind as millennials are able to afford only 19% of the homes in these markets. To determine some of the best cities for millennial homebuyers use this cost of living calculator.
As inflation continues to rise, financial obstacles continue to be the clear challenge with millennial homebuyers, especially as the student loan debt crisis reaches accumulative highs of $1.6 trillion nationwide.
However, many economists have determined that student loan debt only affects a specific subset of millennial homebuyers, specifically those that acquired student loan debt, but did not complete a higher education degree.
Many millennial homebuyers who gained credentials from higher education are beginning to purchase their first home after amortizing enough of their student loan, leveling their debt-to-income ratio.
So, how can millennial homebuyers thrive in a homebuying market with a potential recession?
A report released by Fannie Mae, shows millennials spend more than 30% of their income on housing, which has historically been much lower, making their debt to income ratio for an FHA loan more resilient to an economic downturn. Also, many millennials have completed some form of higher education, making them more employable than previous generations, in the event of a recession. Lastly, if unemployment rises, the housing demand will reduce, making it prime time to purchase a home if you are still employed.
Another plus, is that economists predict that a potential recession will not occur on a national scale, but rather regionally and the impact in each region will be determined by the demand of the goods and services provided in each specific region.
While an economic decline may loom in the future for many American citizens, it is important to equip borrowers with the means to eliminate debt and practice budgeting methods, so they can experience a healthy financial future, regardless of future events or circumstance.