2015 could be the year of the millennial in the real estate sector.
As real estate agents look back on the year that was and ahead for what to expect in 2015, new signs indicate that the individuals they may be courting the most are people in their 20s and 30s.
Due in part to rental rates for apartments increasing, a substantial number of millennials - men and women born during the 1980s and early 2000s - will enter the homebuying marketplace, according to a new survey from listings website Zillow.
Stan Humphries, chief economist at Zillow, indicated that because home value appreciation is projected to ease, this should make it easier for first-time buyers to get off the sidelines. In a separate report from the National Association of Realtors, first-time buying has diminished this year, comprising roughly 1 in every 3 homebuyers.
The same can't be said for rental rates, however, which Humphries predicted will advance more quickly.
"Rents will see no such slowdown, and will continue to grow around 3.5 percent annually throughout 2015," said Humphries. "As renters' costs keep going up, I expect the allure of fixed mortgage payments and a more stable housing market will entice many more otherwise content renters into the housing market."
Throughout most of 2014, mortgage lending rates have stayed firmly entrenched in 4 percent territory, based on previous Primary Mortgage Market Surveys from Freddie Mac. In the past several weeks, however, rates have gone below the 4 percent threshold. During the week ending Dec. 4, the average for 30-year-fixed-rate mortgages hit a low not reached since May of last year at 3.8 percent. That's down from 4.4 percent 12 months prior.
By the conclusion of 2015, millennials may supplant Generation X as real estate agents' largest segment of buyers, the Zillow report predicted. Humphries noted that part of the reason why millennials haven't already taken 35- to 50-year-olds is because many have delayed buying until they get married and/or have children.
"As this generation matures, they will become a homebuying force to be reckoned with," said Humphries.
Agents may want to address mortgage approval concerns
Housing experts say that another factor that may have contributed to the low rate of first-time buyers this year is the difficulty with which borrowers have with the mortgage approval process. NAR chief economist Lawrence Yun recently suggested that lenders may need to loosen their credit standards for first-time buyers to come back to the market in full force.
Securing a prime lending rate may not be as difficult as some millennials perceive, HousingWire reported. Joel Gurman, vice president of mortgage banking at Quicken Loans, said that prospective buyers should do some investigative work, asking a lender or agent what standards they would have to satisfy to be approved for an affordable loan.
Real estate agents should be sure that their clients - millennials or otherwise - understand some of the basics of mortgage lending. For example, Gurman told HousingWire that borrowers often think that "preapproved" and "prequalified" are one and the same, when in reality they mean very different things.
"The preapproved estimate is not set in stone, but it is much more accurate than a prequalification and can give buyers an advantage over others who have just been prequalified," said Gunman.
Some of the other mortgage issues agents may want to clear up with their clients include not having to put 20 percent of home's cost as a down payment in order to qualify, as many falsely believe that this is a mandatory precondition.