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Young professionals are a force to be reckoned with in New York City real estate. NYC’s comptroller reports that 1.6 million millennials lived in the city in 2014. Nowadays, Millennials buying a home in New York City is commonplace. A more accurate way of titling this article might be “Is Buying in NYC an Option for Millennials without a Trust Fund?” The answer is yes. However (regretfully, there is a however), with standard real estate prices in Manhattan and the neighboring boroughs, significant challenges are new to the millennial generation.
Owning a home at 25 isn’t realistic anymore. Valid for most places, not just New York City. So, when you throw in a starting price of around half a million for a one-bedroom apartment with high student loan debt and cost of living, things get complicated and can feel disheartening. But, there’s always hope if you want to own. Here are considerations for Millennials buying a home to assess before starting your search.
Benefits of Millennials Buying a HomeBenefits of Millennials Buying a Home
It’s in your 20s that many major life decisions are made. Your choice of what to study, make a career, and how lay the foundations for long-term investments and success. Buying a home is another significant choice; understandably, it’s the one many millennials balk at. Many are burdened by student loans, while others doubt homeownership as a lifestyle choice. But when you examine things closely, you can see that buying a home can lead to many benefits, especially if you do it in your early years. To help you decide, here are those benefits you’ll get from buying a home in your 20s.
You’ll be investing in your future.You’ll be investing in your future.
A purchase now means an investment that will grow in the future. The sooner you can start that, the better the return is. Home values in NYC have increased by 30% since their lowest point in 2011 and look set to continue for at least another year before the market stabilizes again. So the sooner you buy, the better chance you have of getting a good price, as it looks like home prices are only set to continue rising. The good news is that NYC is currently in a buyer’s market. Meaning you have a better chance of negotiating a lower selling price. After several years when you’re ready to move on, you can sell to provide the down payment needed for a larger home.
You’ll build your credit.You’ll build your credit.
Millennials buying a home means you can start building your credit history early. More extensive credit history will impress future lenders when you next need a loan. Regular monthly payments on your mortgage will also ensure you have a high credit score, so you should have little trouble securing a loan when it comes time to upgrade. You’ll probably need a mortgage loan to buy a home and start building the credit. Fortunately, there are ways to increase your credit score over time. The sooner you begin building a good credit history, the better your prospects will be.
You’ll learn better spending habits.You’ll learn better spending habits.
It may be cliché, but buying a home at a young age makes you more responsible. You’ll face many more challenges ahead, so the sooner you build good spending habits, the more comfortable you’ll make everything else. Having that monthly mortgage to pay for, plus utilities and other maintenance costs will help keep your spending in check. You’ll learn the importance of investing in your future and how to manage money, which is a skill that takes time to acquire. In a city as notoriously expensive as New York, it helps to be smart with your savings.
You’ll receive tax benefits.You’ll receive tax benefits.
The costs of becoming a homeowner may look beyond your means, but when you look at the long-term benefits, it can cost you less than renting.
There are the tax credits you’ll receive as a homeowner, which will lower your tax liability. Meaning you’ll have to pay less money in taxes each year. Then there’s the fact that, at a certain point, it’s cheaper to buy than rent in NYC. Research by StreetEasy found that this tipping point is 4.9 years. So if you plan to stay put for at least five years or more, it makes sense to buy rather than rent.
You’ll enjoy more freedom.You’ll enjoy more freedom.
Having to share a tight apartment with a roommate in NYC is not easy. You’ll have to consider their needs and concerns when making any changes to the property and mold your lifestyle for the sake of civility. But when you own your apartment, you can do what you wish without anyone’s permission. Getting this at a young age will increase your self-esteem and courage to continue building a bright future. There will still be neighbors and the building’s board to take account of, but compared with a renter, you’ll have much more freedom in your choice with the property.
Becoming a homeowner in NYC is a big decision you should not take lightly. Make sure to consider all your options and decide if now is the right time to buy. Even if you can’t buy just yet, you can still put a plan in motion to do it before the end of your 20s. Buying a home might cost a lot of money upfront, but you’ll see how that investment can pay off when considering the long-term benefits.
Considerations for Buying a HomeConsiderations for Buying a Home
Know When to Buy and When to RentKnow When to Buy and When to Rent
Before buying property, research the pros and cons of renting versus buying. Are you considering buying real estate as a long- or short-term investment? Are there market trends that you should consider?
Benefits of Owning in NYCBenefits of Owning in NYC
Owning a home in NYC can have considerable benefits. Your monthly mortgage bills can be cheaper than rent, depending on your mortgage and what you currently pay. It is also beneficial because of the investment value. The neighborhoods of NYC are constantly changing, and if you can grab a place for cheap now, there’s a good chance that the resale value will increase. Knowing your neighborhood is vital to making a move, and consulting with specialists to find up-and-coming neighborhoods could help you in the long run.
Investigate Financing OptionsInvestigate Financing Options
Will you need to take out a loan? If so, what type of mortgage loan will be the best option for you – a 30-year or 15-year fixed? Will you need to participate in a first-time homebuyer program? Work with a mortgage lending professional while navigating your options.
Stabilize Your FinancesStabilize Your Finances
When entering the home-buying process, your spending habits should be conservative, especially if you seek financial assistance. Having a sizeable debt-to-income ratio or making expensive purchases could hurt your chances of securing financing.
Even if you aren’t borrowing money, you should save as much as possible for down payments and closing costs.
Evaluate your lifestyle. You’ll Have it in 5-10 Years.Evaluate your lifestyle. You’ll Have it in 5-10 Years.
If you’re buying a “forever home” and want to have a family in the future, this will influence the floor plans and neighborhoods you consider. If you rent your property while you work overseas or after you move, it is important to know upfront because it’s not always possible to rent out a property you buy.
Create a List of Pros and Cons Throughout the ProcessCreate a List of Pros and Cons Throughout the Process
It’s unlikely that you’ll get everything you want. As you explore properties and financing options, keep a list of pros and cons for each and rank them based on your priorities.
Work with a Buyer’s Agent You TrustWork with a Buyer’s Agent You Trust
Be sure to work with a buyer’s agent who has your best interest in mind, is consistently easy to contact, and has experience.
Determine the Type of Property You WantDetermine the Type of Property You Want
Consider building an apartment size, property taxes, maintenance/common charge obligations, and amenities included.
Scope out NeighborhoodsScope out Neighborhoods
Explore different neighborhoods and weigh all possibilities. Don’t assume you know everything about a neighborhood before you’ve commuted to work from it or have stayed there overnight. See if you can rent a room on Airbnb or bunk with a friend.
Identify the Forms You’ll Need to Fill out.Identify the Forms You’ll Need to Fill out.
There’s a lot of paperwork involved in buying a home. Be aware of the forms you’ll encounter and what they mean before signing them. Always consult a professional if you have questions.
Learn About the NeighborhoodLearn About the Neighborhood
Look at crime ratings, school zones, transportation options, future development projects, grocery stores, and anything necessary to your lifestyle and well-being before you buy.
Looking Beyond ManhattanLooking Beyond Manhattan
Coming out of college, I see crowds of people ushering toward Manhattan. They want the city’s lifestyle, and many can afford the rent when rooming with friends. But by the time you’re ready to buy, unless you’re very close to your friends or have a significant other, you could be going it alone.
But buying can still be an option if you’re willing, able, and determined to save. By looking at neighboring boroughs like Brooklyn, you can find more affordable homes without sacrificing the city’s lifestyle. Looking outside of Manhattan can often get you the square footage for your buck and give you an escape from the hecticness of the city center.
Millennials are Changing the Home Buying IndustryMillennials are Changing the Home Buying Industry
If you live in New York, and it’s your dream to be a homeowner, don’t be too discouraged. Millennials contributed over half a trillion dollars to the housing market last year. About one-third of millennials are already homeowners, and many go on to own multiple homes. So, don’t let yourself be discouraged. It’s surprising what planning, determination, and saving can do to achieve your homeowning goals.
Make a realistic plan involving your current expenses about your income. Figure out how much you can save a month and plan how many months it will take to afford a downpayment on a home in your budget. After that, stick to your budget, and explore mortgage options and affordable research homes.
It may take longer than previous generations, and you might have to be more creative with your money, but if it’s your goal to own in NYC, there’s always a way to make it happen.
What Millennials Want in a HomeWhat Millennials Want in a Home
In 2015, millennials surpassed baby boomers as the largest segment of the population. According to the 2016 NAR report, Millennials-those born between 1980 and 2000 – now make up 35% of the buyer market, with 68% saying their current home is only a stepping stone. However, they’re proving to be a difficult market to pin down.
Many are waiting until later in life to start families. Others are saddled with student debt and low wages, preventing them from amassing significant savings. Regardless, many of them still express a wish to be homeowners. What they want in a home is now leading to significant changes in home design. Here be a look at what millennials want in a home and why.
Compared to older generations, millennials are more pragmatic in their housing needs. There’s more desire for multi-functional rooms that can serve dual purposes. Spare rooms are also making a comeback as the owner can design them to meet their needs, such as a game room or optional bedroom. For most millennials, a case of less is more than square footage. Minimalism is the new buzzword as people look for ways to optimize their space and cut down on wastage.
Although often touted as a generation that prefers city living, many studies show that this applies to only a small portion (5% to 16% – depending on the survey). With such a broad demographic, this still translates into big numbers.
Regarding location, millennials want a place close to work and things to do. Out of 1000 respondents, one study found that 33% favor a home less than 10 miles from a major city. While 30% are willing to settle for a house no more than 25 miles from a major city, the location may be something their willing to sacrifice on, but one thing they want is the quality of materials.
Home design is one of the top motivating factors in choosing a home for millennials, emphasizing functionality. As many millennials have few savings to put into design after closing, they prefer homes that come ready-made with all the amenities they desire.
A generation ago, the living room was the home’s center, which shifted to the kitchen. An open floor plan is now the preferred option, with many favoring an integrated design that allows more flow during social gatherings. Millennials are also far more in-tune with the home style they want than previous generations.
Information is now so freely available online that buyers can spend time deciding what they want before their home search even begins. What they want is a home that fits their social lifestyle.
A home office space was also an essential factor in choosing a home. A recent study found that 80-90% of the US workforce plan to telework part-time even if the buyer doesn’t work full-time at home.
NYC is great for new graduates and millennials, but it’s also a great city for growing up and starting your career, family, etc. You don’t have to be a 20-something to enjoy NYC. You must find the best neighborhood to enjoy living in NYC at all stages of your life.
Neighborhood options for MillennialsNeighborhood options for Millennials
NYC is great for new graduates and millennials, but it’s also a great city for growing up and starting your career, family, or both. You don’t have to be a 20-something to enjoy NYC. You must find the best neighborhood to enjoy living in NYC at all stages of your life.
Astoria remains a top choice for young professionals and families. It’s a neighborhood that emphasizes community and laid-back life. Astoria has quieter options for your evening, with Greek food and Italian eateries if you’re no longer fan of the bar scene. It also offers opportunities to see great works of art, watch a play, head to the beach, and enjoy a quiet walk with your dog. If you have outgrown the bustle of the city and long nights at the bar, you can spend your weekend mornings at a farmer’s market in Astoria instead.
Greenpoint is considered hip, but to be fair, it’s more like your cool, more mature older sibling. It has all the amenities of the 20-somethings neighborhoods, but it also provides class, quieter streets, and a slightly longer commute to Manhattan. This neighborhood attracts young professionals, people who are just starting, and those a little more established in their careers. It is excellent for art galleries, eateries, safe neighborhoods, and outdoor recreation.
Windsor TerraceWindsor Terrace
If you’re tired of living like a struggling artist, or if you have moved past the living-above-a-bodega lifestyle, Windsor Terrace is an excellent way to ease into suburban living. It’s close to Prospect Park for your quieter weekends and has secure commuting options if you work in Manhattan. It also has small shops and eateries in place of tourist attractions, which keeps the streets quiet. Many of the homes in Windsor Terrace are either row brick homes or wood-framed places with stoops and backyards.
Boerum HillBoerum Hill
Brooklyn’s Boerum Hill neighborhood is the destination neighborhood for young professionals and new and growing families. Like you, Boerum Hill has a robust and supportive community of hardworking people. It has undergone a tremendous transformation over the years and now offers places to dine out on Atlantic Avenue, safe neighborhoods for family walks on tree-lined streets, and a day trip to Carroll Park. Commuting from Boerum Hill is comfortable with its ten subway lines.
Financial DistrictFinancial District
The Financial District is excellent for those who commute and have a little more money to spend on rent. The neighborhood doesn’t pretend to be a “cool” neighborhood, and it shies away from “trendy,” which means the 20-somethings and students stay far away. Peak hours are at lunchtime, and then it dies for a quiet night at home, a local brew, or a slice of pizza. The Financial District attracts tourists to its historic cobblestone streets and Manhattan skyline, but when the sun goes down, the tourists leave, and the streets are quiet again.