After the unprecedented hot market trends in 2021 and rising mortgage rates to stem the tide of frantic buyers, Millennials are entering the housing market as a serious buyer demographic. Although many buyers still face obstacles to homeownership, they’ve found ways to balance student debt and inflation with the costs of purchasing homes in San Diego. Here’s a deep dive into why Millennials are choosing to buy in San Diego.
Millennials are buying beginner homes
San Diego’s housing market is still pricey despite cooling trends across the state which is pushing many young buyers to choose beginner homes rather than a more expensive dream property. With single-family residences having a median price
of $1.07 million, many younger buyers are still priced out of the housing market. Homes spend a median of 10 days on the market, which is a narrow time frame for buyers making a search.
has been delayed for millennials, it seems like they’re finally ready to make the shift from renting to buying. The extra time, and in many instances, the extra support from family members, has helped millennials manage previous debts and establish careers that make homeownership more feasible.
Many real estate developers looking to capitalize on younger buyers moving to San Diego are also using this opportunity to build and sell homes at a lower price. With millennials making up 13% of the state’s population, there’s a lot to gain from investing in newer developments. Not only does new construction help with the housing shortages in the area, but it opens up a viable pathway for the younger population to start buying.
Why San Diego?
Even though the cost of living in San Diego
is higher than in other CA cities, buyers are attracted to its shoreline access and countless amenities. Great year-round weather makes the city a haven for outdoor activities like swimming, boating, beach volleyball, cycling, and much more. Vacationers flock to spacious beaches, inland attractions like Balboa Park and the San Diego Zoo, as well as annual events like San Diego Comic-Con.
San Diego also has a rich cultural history on display in the Spanish Colonial Revival architecture throughout the community and its many museums. High-quality education at the University of California in San Diego, numerous jobs in the US Navy, Marine Corps, and healthcare sector, as well as its distinct neighborhoods cater to millennial sensibilities.
How Millennials are buying homes
There are a few ways millennials are buying homes while accommodating financial constraints. Options like FHA loans and house hacking are being sought out to manage home expenses. For even more choices, millennial buyers should partner with a local agent like Jamie Lennon.
FHA loans have always been a valuable tool for first-time buyers with limited funds. FHA loans are government-backed loans financed by the Federal Housing Administration that provides attainable financial aid for home purchases. Typically, these loans come with lower down payments, more flexible credit score qualifications, and lower closing costs. In fact, first-home buyers can qualify for a down payment as low as 3.5% for a one-to-four-unit property.
Once buyers own their home, they can “house hack” the property, or rent out some of the rooms to pay for the mortgage and utilities. Although San Diego homeowners shouldn’t expect all homeownership costs to be covered this way, it can still help ease the financial burden. However, buyers should always review zoning laws and HOA rules before house hacking.
Obstacles to homeownership
The ingenuity and resources that millennials bring to buying homes in San Diego are even more impressive when considering the obstacles that they’re up against. From rising inflation and mortgage rates to student debt and a slim housing supply, here are some of the main reasons why homeownership among millennials has been delayed.
According to NAR, buyers who apply for a 30-year fixed-rate mortgage in San Diego County face a monthly mortgage payment
of $4,370. This is $1,675 more than it cost last year. The high payment cuts into purchasing power and makes expenses much more difficult to manage once millennials are homeowners.
Rising rental rates are another challenge millennials face when saving for a home purchase. Although rental caps in the area limit the amount a landlord can increase yearly prices, some renters are still being priced out of the area. In order to build up savings for a down payment, many millennials live with multiple roommates to manage costs.
Many existing homeowners in San Diego are choosing to stay in their homes or take their properties off the market due to harsh buyers’ conditions. Rather than deal with high interest rates and rising housing prices, many sellers would prefer to wait out the current market. This causes a market freeze in which the only people who are selling are those that have clear goals. This will continue until mortgage rates decline or foreclosure rates rise.
A lot of millennials left higher education with large amounts of student debt. This makes it harder to qualify for a mortgage, save up money for a down payment, and manage homeownership costs once they’ve bought a home. Some may decide to rent until their debt is under control, while others may turn to house hacking to afford a property.
Ready to buy in San Diego?
Millennials are starting to enter the market in more numbers now that they’ve had the time to plan out their purchase and manage other financial challenges. San Diego is a prime spot for buyers due to its job market and outdoor recreation. When you’re ready to start a search in the area, contact local agent Jamie Lennon
for expert help. Jamie enjoys cultivating relationships with her clients and helping them find their perfect residence.