A shortage of entry-level homes in the Colorado Springs market is making it harder for Millennials to fulfill their American Dream.
“I believe there are more young people that would be buying homes now, if there was more affordable inventory available to do so,” said Tony Rose, broker and owner of Rose Real Estate LLC. “Millennials are essentially aging as a group and are at that point where they want/need to buy their first home.”
In recent years, median home prices have climbed in the Colorado Springs area while the entry-level inventory shrank, Rose said.
“The last young couple I worked with, they were out on their own for a couple of years and then ended up moving back in with family members for a year and a half in order to save the money to buy a home,” he said.
The median sales price of single-family homes in the Colorado Springs area has increased by more than $45,000 in the last two years, according to the Pikes Peak Association of Realtors Housing Statistics.
“What I’ve been seeing, at least in our local market, Millennials are having to save for a little longer than previous generations because they’re having to buy something slightly larger and more expensive,” Rose said. “There isn’t a lot of choice in the lower price points in the market, so their starter home could end up being a home that they live in longer than they had originally anticipated.”
According to a new study released by realtor.com, the median price of a home in the U.S. is projected to increase by 46 percent over the next 12 years.
The real estate website predicts that by 2031, potential homebuyers will need to save $347.84 per month for 12 years in order to put down 10 percent toward a new home in Colorado Springs.
The median home price in Colorado Springs is expected to be $442,660 in 2031, according to realtor.com’s analysis.
Natalie Olmsted, a broker associate and Realtor for EXIT Realty Mountain View, teaches a free monthly class designed to help first-time homebuyers understand the buying process.
“The goal is not to have you come to my class and then tomorrow you buy a house,” she said. “It’s about you coming to my class so that I can educate you on what it takes to purchase and then also so that you start becoming familiar with terminology and just the overall process of buying a home.”
“There’s so much more to purchasing a home than just the down payment.”
— Natalie Olmsted
While Olmsted agrees with Rose’s assessment of the entry-level inventory, she said another barrier keeping Millennials from buying is the basic knowledge of what it takes to purchase a home.
“First time homebuyers — a lot of times they don’t realize the process isn’t as difficult as they think it is, or that they do have the money and a good credit score, and actually already qualify to buy a house,” she said. “I’ve heard more times than not this is information they never learned about in school or anywhere else.”
During the class, Olmsted talks about the availability of different state and federal down payment assistance programs.
“There are different ways that you can purchase a home without a ton of money out of pocket,” she said. “But no matter what, they are still going to need at least $1,000 that they can put down. And usually they will need a little bit more than that in our current market.”
Olmsted also educates her classes on current market conditions and how they change.
“Two summers ago, I really saw where there were 10 to 12 offers on a home before there was an offer accepted,” she said. “Last summer, it wasn’t quite that serious.”
Olmsted said buyers need to understand if sellers are accepting bids at list price or if they should be offering more in hopes of having the winning bid.
“That’s one of the things that I go over in the class is letting them know that, from year to year, from season to season, the market will fluctuate,” she said. “It’s important buyers know before they make an offer what the market is doing.”
With today’s market and its outlook, Olmsted said the sooner someone starts saving and preparing to buy a home, the better.
“A younger person who maybe is still in college and not really thinking about buying a house yet can still be saving for it already, if they have the knowledge of what it takes to buy a home nowadays,” she said. “There’s so much more to purchasing a home than just the down payment. It’s your credit; it’s your job history; it’s having filed tax returns — all of that information is just as valuable as having enough for your down payment.”
Both Rose and Olmsted expect the entry-level inventory challenge to exist throughout 2019 and into 2020 unless more Baby Boomers or Gen Xers start selling their homes to move into retirement communities or to higher tier markets.
For those considering selling their home, “now is a prime time to do it,” Rose said.
“Interest rates are still historically low,” he said. “You’re getting a bit of a premium for your lower-price home because of the competition in that part of the market.”
Sellers nationwide who sold their homes last year had an average profit of $61,000 — an $11,000 increase from 2017, according to ATTOM Data Solutions’ 2018 U.S. Home Sales Report.
Additionally, buyers are able to negotiate with sellers more in the mid- to upper range of the housing market because the demand isn’t as high as it is for entry-level homes, Rose said.
“And, I really think you’re going to be making more money by selling that lower-market home now as opposed to waiting,” he said.