Hopeful Generation Y individuals seeking to find a home to rent are being given another, possibly more cost-friendly option – buying their own home.
PulteGroup, a Detroit-based home building company, has created its "Independence" series of houses, meant to cater to a younger age group. The idea is being tested in suburban Chicago, St. Louis and San Antonio, offering one- and two-story homes, ranging from 1,100 to 2,300 square feet and up to four bedrooms.
As reported in a Wall Street Journal article, a San Antonio home through Pulte, starting around $105,000 can be had for around $775 a month, which is lower than some monthly rental costs.
"We have falling incomes, rising rents and nothing but substantial upward pressure on those rents," said Chris Herbert, director of Harvard University's Joint Center for Housing Studies, in a Reuters article. "And nothing in the cards suggests it will turn around anytime soon."
The Census Bureau reported that a struggling economy and many Americans being hit with foreclosures helped force the nation's homeownership rate to fall to 65.4 percent in the first quarter – its lowest level in 15 years. The rate dropped from 69.2 percent in 2004. Housing experts said that percentage point represents the movement of 1 million households to rentals.
The difficult part though, experts say, is being approved for financing once the decision to buy a home has been made.
According to a Morgan Stanley research report, the average credit score is 762 for a consumer securing a mortgage backed by government-sponsored enterprises – Fannie Mae or Freddie Mac. However, 65 percent of Americans have a score lower than 750.
With a shift happening in housing market trends, new borrowers will attempt to finance their home – most likely the biggest purchase they have ever encountered. As such, lenders should invest in loan management software, to ensure that a proper repayment plan is created for each individual.