The American Dream is the idea that anyone, regardless of their background, can achieve success and prosperity through hard work and determination. It is often associated with the idea of upward social mobility and the opportunity to achieve a better life for yourself and your family.

In a recent survey conducted by Bankrate, respondents were asked to rank achievements that define the American Dream. Not surprisingly, homeownership ranked above other significant milestones, including retirement, career and earning a college degree.

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Despite the desire for homeownership, there are a handful of economic trends that are headwinds for the current largest living adult generation, the millennials. Millennials, born between 1981 and 1996, have a harder time buying a home than previous generations due to a combination of factors.

One major factor is the rising cost of housing. According to the Federal Housing Finance Agency (FHFA), the average annual home price increase has been 7.7% since 2012. Just between April 2021 and April 2022, home values nationally rose an astonishing 18.8%.

Another factor is the limited supply of housing. The lack of new construction in recent years has contributed to a shortage of several million homes, driving up prices and making it more difficult for millennials to find an affordable home.

Furthermore, the high student loan debt, which many millennials carry, can make it more difficult for them to qualify for a mortgage. The average student loan borrower carries more than $30,000 in debt, which can make it harder to save for a down payment.

Millennials are also delaying major life events, such as marriage, which can make it harder for them to buy a home.

To work around these economic challenges, millennials can consider the following strategies:

1.        Save aggressively: By saving as much as possible and cutting expenses wherever possible, millennials can increase their chances of affording a home.

2.         Look for down payment assistance programs: Many states and local governments offer down payment assistance programs for first-time home buyers, which can help reduce the amount of money you need to save for a down payment.

3.         Consider alternative financing options: If you are unable to qualify for a traditional mortgage, there are alternative financing options that may be available to you, such as FHA loans or VA loans. These loans may have more lenient credit and income requirements but may also have higher interest rates or fees.

4.         Get pre-approved for a mortgage: Before you start looking for a home, it is a good idea to get pre-approved for a mortgage. This will give you an idea of how much you can afford to borrow and will make it easier to make an offer on a home when you find one you like.

5.         Look for homes in more affordable markets: If housing prices in your area are too high, consider looking for homes in markets that are more affordable. This may mean moving to a different city or region, but it can significantly reduce the amount of money you need to save for a down payment and allow you to afford monthly mortgage payments.‍

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Disclosure:

This information is presented for educational purposes only and should not be treated as investment advice. Morton Wealth makes no representation that the strategies described are suitable or appropriate for any person. You should consult with your financial advisor to thoroughly review all information and consider all ramifications before implementing any transactions and/or strategies concerning your finances.

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