Starter Homes May Be Answer for Millennials

For a lot of young people who are starting out, renting an apartment has been the norm and has made sense financially.

However, with rising rent costs all over the country, the tide is turning for Millennials who would rather put that money toward a home payment and build some equity.

“The rent for an apartment comes out to be the same as paying on a mortgage,” says AJ Saleem, who recently closed on a newly built home near Sugar Land, Texas, just outside of Houston, with his fiancé Sofia.

Saleem says a new home gave him and Sofia the design and architecture they desired.

“New homes definitely have a contemporary and modern look and feel to them. Some of them are already pre-wired for home automation. My app on my iPad can control every part of the house,” Saleem says.

Many Millennials — young people from the ages of 18-34 — are facing a failure to launch; that is they are having a difficult time starting out their lives and achieving the American dream. Despite being the largest labor force, according to a new study by the Pew Research Center that was done in the last quarter of 2015, good jobs with good salaries are still hard to come by for the majority of young people.

When you mix these two things with crippling student loan debt and a rise in cost of living, you get a generation that is downsizing in all areas of their lives, most important when it comes to buying their first home.

Despite many news headlines that purport that most young people are moving back into their childhood homes and are afraid to commit to decades-long mortgages, the opposite is true. A recent survey by TD Bank found that two-thirds of Millennials say they think they will purchase a home in the next two years. Being able to afford a home is still something that’s keeping many Millennials from purchasing, along with bidding competition.

But, the dream of homeownership is now possible due in large part to newly constructed starter homes that come with affordable price tags.

According to a recent article by Prashant Gopal for Bloomberg Business, newly constructed starter homes are coming back in a big way and major builders like D.R. Horton, Tri Pointe Homes and Meritage Homes are building communities designed for Millennial first-time buyers. This is a smart move because Millennials now account for 36 percent of U.S. home purchases, according to data collected by the National Association of Home Builders.