Guest column: Millennials are buying houses, developers advised to keep up with demand
Published on: August 26, 2017
Taylor Maury, Memphis Business Journal
As many Memphis-area real estate professionals will share, the local market is full of activity from eager young buyers who want to strike while the iron is hot.
In neighborhoods such as Pidgeon Estates, High Point, Central Gardens and the Joffre area, “For Sale” signs are replaced with “Contract Pending” signs within what feels like a matter of hours, causing me to question the common perception of millennials and their homebuying habits.
Society paints millennials as unemployed, cellphone-addicted, bound to their parents’ basement and prone to put too much avocado on their toast.
In the Memphis market, however, this is a far cry from what I’ve observed.
With so much activity in these “younger neighborhoods,” it is clear that millennials have made the right decision to live, work and start families in Memphis. If only the supply could keep up with the demand.
The increasing popularity of these neighborhoods over the past several years has resulted in a tremendous jump in home values, providing money and opportunity for second-time homebuyers. Increased home equity, paired with low interest rates, have created the perfect catalyst for positive buying trends.
Here’s an example: Let’s say a young family purchased a home for $200,000 in 2012 with a $20,000 down payment and a 3.25 percent interest rate. If that home is worth $250,000 today, this family’s equity has grown from $20,000 in 2012 to more than $100,000 — a combination of the initial $20,000 down payment, principal payments for the last five years and the $50,000 increase in the home’s value.
Growing families in need of an upgrade are using this increased equity to buy a larger second home, creating opportunities for first-time homebuyers to purchase in these great neighborhoods (while supplies last).
Downtown’s 38103 residential growth is also quite staggering.
Apartment communities are being built at an alarming rate, attracting a younger workforce to contribute to our boosted local economy. While any development is a great sign, what happens when these Downtown renters want to begin accruing equity and trading monthly rent for a mortgage?
Many first-time homebuyers are not quite ready for the suburban life of Germantown or Collierville; they want to live near the action of Overton Square, Cooper Young, Brookhaven Circle and Downtown. This opens the door for many “fixer-upper” investors and developers to take advantage of the bustling market.
Although mortgage rates are expected to increase within the coming months, inflation is predicted to remain relatively stagnant.
Therefore, interest rates, although rising, should not increase to unmanageable levels.
It is a great time to buy, even if the lack of substantial residential inventory might hold back a first-time homebuyer. Demand for growth is always a good thing.
Taylor Maury is a residential lending officer at the Memphis headquarters of Financial Federal Bank.