Sadly, today’s millennials are bombarded with dreadful forebodings from mainstream media that buying a home in today’s economy is a dumb idea. Here’s the header from an article posted on the CBS website: “Dumb moves that sound smart: Buying a house.”
True. America’s economy has seen better days. But economic uncertainty is a product of cyclical swings in the economy. And cyclical swings in the economy are a fact of life as is uncertainty a fact of life. Though structural changes are largely responsible for this down economy being unusually long, the economy will eventually improve.
That the economy will eventually get better is a certainty. Millennials must decide whether to heed to the demands of conventional wisdom and hide in the closet waiting until better times to buy a home. Or, act according to unconventional wisdom and buy now while home prices and mortgage rates are still at historical lows.
It’s always good to remember that there were more self-made millionaires during the Great Depression of the 1930s than at any other time in American history. Americans became rich by the thousands simply because they heeded the unconventional wisdom of starting their own businesses and buying dirt-cheap real estate. Meanwhile, conventional wisdom during the Great Depression cautioned to hide in the closet and wait out the depression.
Here are some reasons why Atlanta’s millennials would be smart to heed the unconventional wisdom of buying a home today instead of later.
- It’s far cheaper to buy than to rent in Atlanta, especially in Atlanta’s southern suburbs. Fact is according to a nationwide survey by Forbes.com, buying a home in Atlanta is “57% cheaper than renting in the best of circumstances.”
- Lenders are making it easier to get a mortgage. According to the most recent Origination Insight Report from Ellie Mae, the average FICO credit score on approved mortgages fell to 721 in November 2015. The average FICO score for conventional mortgage home purchases was 754, 687 for FHA, and 706 for VA.
- Mortgage rates are still at historic lows. According to the May 31, 2016 Mortgage Rate Report from Banknote.com, the average 30-year fixed-rate mortgage was 3.65%, down 10 basis points from a week ago. At this average rate, your monthly out-of-pocket will be about $457 for principal and interest on every $100,000 you borrow. Note that the average selling price of a home in Atlanta’s southern suburbs is less than $100,000.
- Atlanta’s home prices will continue to increase, but at a slower rate. Zillow forecasts Atlanta’s home prices to appreciate 5.9 percent during the 12 months ending October 2016, down from 11 percent during the preceding 12-month period.
The Down-Payment Blues
Most lenders want a sizable down payment for their conventional mortgage programs. Scrounging up a huge down payment can be a major challenge for millennials saddled with student loans and other credit card obligations. But don’t let down-payment issues keep you out of a home for which you otherwise qualify. Check out loan programs from the Federal Housing Administration. FHA loans offer:
- Low down payments – as low as 3.5 percent down payment
- Low closing costs
- Easy credit qualifying – as low as a 580 FICO score to qualify for a 3.5 percent down payment, even lower with a larger down payment.
Keep in mind that Atlanta’s baby boomers are retiring, creating a huge flow of homes on the market for millennials to buy. You can heed convention wisdom and continue to rent for zero return on your monthly rental payment. Or you can act according to unconventional wisdom and get in on the real estate action while the getting is still good.