INSIDE
This Issue
PROOF THAT WE’RE ALL GETTING OLDER: GEN Z IS STARTING TO BUY HOMES PAGE 5 ONLY RETIRING MINDS CAN DECIDE MORTGAGE QUESTION PAGE 7 CLASSIFIEDS PAGE 7
MAY 21-27, 2021
INSIDE
TABLE OF CONTENTS
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5
Proof that we’re all getting older: Gen Z is starting to buy homes ............................P5 Q&A Ask Our Broker.......................................................................P6
Only Retiring Minds Can Decide Mortgage Question ....................................P7 Classifieds............................................................................P7
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STAT Real Estate Stat
43 Million The number of housing units occupied by renters in the United States. Source: Statista
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May 21, 2021
o t v s s e t p o c w f b w d p l t
Proof that we’re all getting older: Gen Z is starting to buy homes
By Erik J. Martin hroughout recent generations, homeownership has traditionally been strongly valued by most. But since the Great Recession and its aftermath, experts suggest that the desire for younger people to purchase and own homes has decreased. Ask any parent who has, over the past few years, taken in a boomerang adult child with massive student debt and weaker job prospects and they’ll likely testify to this trend. It’s curious, then,
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May 21, 2021
to consider to what extent the newest demographic cohort – Generation Z, born roughly between 1997 and 2012, according to Pew Research Center, making the oldest of this group around 22 years old – will be interested in buying homes. While older Gen Zers still represent too small of a sample size to draw conclusions, it’s informative to look closer at the results of a National Association of Realtors (NAR) study conducted last year, which found that 2% of all home buyers and sellers in 2020 fit
this demographic. “We have seen Gen Z buyers begin to enter the home buying and selling market within the last few years, but they have not seen a large enough buying or selling share to report sufficient data. We expect that they’ll continue to enter the buying and selling market, and we hope that next year’s sample contains a larger share of Gen Z participants,” says Brandi Snowden, director of Member and Consumer Survey Research for the Washington DCbased NAR. She adds that it’s
interesting that younger millennials (those 22 to 30 years old) represented the study’s highest share of first-time buyers at 82%. “As Gen Z buyers begin to enter homeownership, we may see that this younger group begins to overtake younger millennials among first-time buyers and that their desire to own a home of their own becomes their top reason for purchasing a home – similar to 56% of younger millennials surveyed,” notes Snowden. “Gen Z has indicated similar views on homeownership, as
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younger generations were more likely to think that owning is a good financial investment.” Abe Labinjo, cofounder/mortgage advisor for Toronto-based Breezeful, says he’s seen strong evidence that Gen Zers could be in a more financially secure position to invest in property when they’re at an age and budget to buy than many expect; what’s more, they could be more aspirational and driven purchasers than their predecessors. “Many prospective Gen Z buyers seem to have learned from the mistakes of millennials and have quickly recognized the restrictions holding them back from homeownership,” he says. “I’ve found that, rather than planning to invest alongside roommates or partners, as many Gen Yers did to save money, Gen Z buyers are preparing to leave home later and focus less on the amenities local to their properties. This reflects the growing resistance to expensive real estate in high-population areas and suggests that Gen Zers are placing a greater emphasis on assets over lifestyle.” Put another way, Gen Z may be more financially savvy than many anticipate. Still, don’t expect this group to start shopping for homes in large numbers anytime soon, per Steve Laret with the Steve Laret Team of Vanguard Realty Alliance in West Chester,
Pennsylvania. “I would look to Gen Z buyers to make purchases later in life than the historical norm. The pandemic of 2020 has forced students to return and remain home, quarantined with their families for an extended period,” Laret notes. “As a result, many Gen Zers have and will become dug in and complacent, I believe.” Debbie Remington, broker/owner of Remington Team Realty, LLC, in Alvarado, Texas, agrees. “It’s not surprising that the 22-andyounger crowd haven’t yet entered the housing market en masse. In fact, many who may be considering purchasing their first home could well be afraid of the limited housing inventory that most markets are currently experiencing,” she cautions. But as Gen Zers settle into careers and family, Remington and others expect an increased interest in owning versus renting. That’s when millennials may finally begin to take a back seat to the subsequent generation and all eyes will be firmly focused on those primarily born in the first decade of the 21st Century. And when that happens, chances are that Gen Yers, Gen Xers, and Boomers will feel the weight of their advancing age all the more. 5
Should you Purchase a Home while Carrying Debt? Question:
We want to buy a home in the next few months. We have $40,000 in cash but also $8,000 in credit card debt. Should we pay off the credit cards?
Answer:
There are a number of unknowns here such as how much you expect to pay for a home, the size of other debts such as cars and student loans, and your income. That said, you have enough cash to consider options. The Federal Reserve reports that as of late 2020 – when mortgage rates reached an historic low of 2.66% – the typical credit card borrower was paying an average interest rate of 16.28%. For an $8,000 debt at 16.28% the annual interest cost is $1,302 or $108.50 a month. The public is catching on. Data from WalletHub’s Credit Card Debt Study shows that Americans are ditching credit cards but that many households continue to carry high balances. The WalletHub figures for March shows several interesting trends.
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In 2020 credit card debt fell by $82.9 billion. For the previous decade Americans had added an average of $54.2 billion in new credit card debt per year. Average credit card debt amounted to $8,089 per household at the end of 2020, down 12% in a year. As the economy re-opens in 2021, WalletHub expects credit card debt to increase by $50 billion this year. In terms of real estate, credit card debt is a concern because of the monthly cost and the potential for credit dings if a payment is late or missed. Lenders focus on a number of measures when they review mortgage applications. One of the most important is the debt-to-income ratio or DTI. In basic terms there are two DTI measures. The first — the “front ratio” — compares monthly housing costs with gross monthly income. The second — the “back ratio” — includes required debt payments for such things as auto loans, student debt, housing costs, and credit cards.
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Q&A
ASK OUR BROKER By Peter G. Miller
With FHA-backed loans, as an example, borrowers generally need a front ratio of not more than 31% and a back ratio of 43%. However, it is possible to have even higher percentages and the back ratio can sometimes exceed 50%. In fiscal year 2020, HUD reported that almost a quarter of the loans it insures had DTIs of 50% or above. There’s a lot of risk to lenders and mortgage insurance plans with high DTIs. With more risk comes higher rates, more expensive financing, and more mortgage application rejections for marginallyqualified borrowers. In a situation where you have $40,000 in cash and $8,000 in credit card debt, speak with lenders and ask how best to use your funds. With sufficient income the monthly payments may not be a DTI problem. But, if your DTI ratio is a concern, then run the numbers to see how a debt pay-off could impact a mortgage application in your situation. Email your real estate questions for Mr. Miller to peter@ctwfeatures.com.
May 21, 2021
Real Estate Weekly
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CLASSIFIEDS REAL ESTATE FOR SALE Open Houses
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Only Retiring Minds Can Decide Mortgage Question take a long-term view, borrowing at 3 percent fixed for 30 years and investing the proceeds in t’s an “old” dilemma that keeps begging new stocks and bonds looks attractive.” answers: If you have the means, should you Of course, whether they can even contempay off your mortgage in retirement? plate easing monthly bills by eliminating their Back in 2009, Tony Webb, then senior remortgage depends on whether retirees have exsearch economist with Boston College’s Center cess savings outside of their retirement accounts for Retirement Research [CRR}, advocated in and emergency reserves. Arguments on the a CRR brief that most households should not pros and cons of pay-off keep changing because “retain their mortgage because they can earn a there’s no firm answer – it’s up to a retiree’s higher expected return in stocks and other risky personal risk tolerance. assets.” With the Dow now topping 30,000, it’s easier Now, Webb, currently with the Schwartz to favor investing over the stodgier move of Center for Economic Policy Analysis, is reeasing cash flow by being mortgage-free. But thinking that argument. rewind back to March, 2020, when the Dow “For people willing to tolerate the ups and sank by more than one-third from pre-pandemdowns of the market and who are willing to ic days. Whether you were sick with worry or By Marilyn Kennedy Melia
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May 21, 2021
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able to tune out the panic is your cue on your risk tolerance. Another, recent CRR brief finds that many Boomers who are now in their sixties are taking a mixed approach to pay-off. Since the housing crisis circa 2009, they “have paid down more than 40 percent of their remaining mortgage and home equity loans on average,” finds Jason Fichtner, research fellow, Center for Financial Security, University of Wisconsin in a recent study. But, “they have also fallen behind in fully paying off their mortgages.” Indeed, just half of sixty-something Boomers have a paid-off mortgage, while two-thirds of people born in the 1930’s were mortgage-free in their sixties. 7
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2xxx urban avenue, Mount vernon
$600,000
Prime commercial property with utilities in street, including P.U.D. water, Puget Sound Energy electricity; Cascade Natural Gas, fiber optics; cable; and sewer. Subject To survey and short plat. Property is located between Chicago Title Company easterly parking lot and Max Dale Restaurant’s south easterly Danya Wolf parking area. MLS# 1649968 360-708-8294
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Classic, impeccably maintained rambler ambler on quiet ccul-de-sac -sac ommunity! Located in beautiful Eaglemont Communit ed on a premium peaceful tranquil natur greenbelt lot, enjoy the privatee peac anquil natural ge co covered deck. Spacious bedr setting & large pacious 3 bedrooms, 2 baths. upgrades, extended har Manyy upgr ended hardwood floors, formal dining & living room fir di oom with gas fireplace, sunny breakfast room, crown molding ceiling fan, stunning kitchen with wn molding, large granite gr counters, high-end stainless steel appliances. Spacious owner bedroom offers an en-suite, jetted tub, shower & walk-in closet, double sink w/granite. Utility room w/sink & storage. Awesome bonus room above the garage for home office/gym or extra bedroom. Welcome to Eaglemont! Elva Hunter John Hunter 360-202-3086 360-202-3086 MLS#1771591
IN END
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$998,000
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