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Millennials are looking for dream homes, but Michigan’s competitive housing market keeps them out of reach

September 07, 2021

A promotion, a pay raise and a 30th birthday all felt like the right time for St. Clair Shores resident Justin Donoghue to purchase his first home.

As he enters his seventh month of house hunting, he’s been outbid five times.

“It’s just been really disheartening to fall in love with a home, write my cutesy letter of why I deserve it and then to be outbid is pretty heartbreaking,” he said.

America’s largest generation is growing up and entering a new milestone as homebuyers. Millennials make up the largest population of home buyers, according to the National Association of Realtors. But they are also having the hardest time finding a home within their budget, according to a realtor.com survey.

Mortgage interest rates hit a historic low as they dipped below 3% last summer, enticing more homebuyers. Meanwhile, fewer houses have been on the market, resulting in competition that has hiked up the price and set an unprecedented pace for buying and selling homes.

Compared to their Gen X peers, millennial first time homebuyers responded negatively at a higher rate when asked about having enough for a down payment or finding a home within their budget, according to the realtor.com survey of 830 adults across the country.

Of those surveyed, 44% of millennials responded that they don’t have enough for a down payment and 34% stated that they haven’t been able to find a home within their budget.

In March, the median home listing price nationwide rose 15.6% from last year. At $370,000, this is a record high, according to realtor.com records.

In the Detroit-Warren-Dearborn metro market, where Donoghue is looking, the median listing price has increased 19.2% compared to last March, landing at $286,000.

Donoghue said he had to stretch his budget almost immediately and was advised by his real estate agent to never offer below the asking price.

“I had always expected when I was ready to buy a home that I would have a little bit of a bidding war and the ability to kind of bargain and bring the cost down,” he said. “That does not seem to be a possibility.”

For homeowner Liz Schlundt, 26, the hot market pushed her to sell earlier than expected. She bought a fixer-upper in Royal Oak four years ago with the intention to make a profit, but she never expected the demand she encountered.

She and her husband Michael, 32, took their time looking for a new home to customize together with plenty of land and privacy. Once they found what they were looking for in Farmington Hills in March, they planned to wait a couple months to sell the Royal Oak house.

But with a push from their real estate agent, they put their house on the market earlier. The Royal Oak house had more than 30 showings in one day and received seven offers over asking price, Schlundt said.

Schlundt said she was shocked by offers to waive the inspection, waive the appraisal and set a possession date without negotiation.

“People were just doing like crazy stuff, things that I would personally never do,” she said. “But that’s just like how hot this market is.”

Despite all these challenges, millennials like 25-year-old Lauren Sutton are still the most optimistic about finding their dream homes compared to their peers.

In 2020, 81% of millennials believed they would live in their dream home at some point compared to 75% of Generation X respondents and 67% of baby boomers, according to a Coldwell Banker Real Estate survey of 2,002 respondents across the U.S.

When Sutton first started looking in December, she came across a house she liked that was outside of her price range. She took the night to sleep on it, but woke to find the sellers had already accepted an offer and the house was off the market.

This was her first taste of disappointment that soon became routine as she spent months scrolling through home listings.

“I was disappointed because I wasn’t finding what I wanted and it was going so fast,” she said. “These houses that are so beautiful on Zillow, they’re going before I even got a chance to get out of work.”

In Michigan, houses are moving 34% faster than usual, with only 44 days on the market, according to real estate data company RealComp. A closer look shows that 85% of houses listed in February 2021 swiftly moved into the pending sales category in the same month.

Nationwide, the number of homes on the market is down 52%, according to realtor.com data.

Sutton’s real estate agent advised making an offer on anything she was interested in and using the inspection period to back out. As a first-time homebuyer, it made Sutton uneasy to commit so quickly.

“I was like ‘Oh my God, this is a lot of money to be just signing up for blindly,’” she said.

Ultimately, the fast-acting approach worked for Sutton and she was able to nab a home in Grosse Pointe Woods after it was on the market for only 11 hours, she said.

That level of competition is expected to last throughout the year. Ramsey Solutions, a financial consulting firm run by author and radio host Dave Ramsey, forecasted that Michigan will remain high for buyer traffic and low for seller traffic in 2021.

Across the country, 2021 is expected to bring a 9% bump in existing home sales and a 21% increase in newly built homes, according to Ramsey Solutions’ analysis.

For those nervous about another housing crisis, Ramsey Solutions’ analysis says a crash is unlikely for the next two years, pointing to the National Association of Realtors assessment that housing prices will go up another 8% in 2021 and slow to 5.5.% growth in 2022.

 

WRITTEN BY: LINDSAY MOORE  PUBLISHED BY: MLIVE.COM  DATE: APRIL 11, 2021


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