Dive Brief:
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Consumer financial services company Bankrate ranked the top 21 U.S. cities based on the feasibility of accumulating wealth as a homeowner there.
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San Francisco topped the list due to its high property values, steady employment rates and concentration of high-paying fields, according to the company. Minneapolis, Washington, DC, St. Louis and Detroit rounded out the top five cities on the list.
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Homeownership isn’t necessary for building equity, however. Only 53% of San Francisco residents own a home, Bankrate reported, because real estate prices there can be prohibitively high. Instead, their larger-than-average incomes bolster their wealth.
Dive Insight:
Although Bankrate uses the list to advise consumers on ways to build equity, and therefore wealth, builders are wise to take note. The national homeownership rate was at its lowest level since 1965 during the second quarter of 2016, a decline blamed in part on millennials who, facing high student debt and limited job growth, have delayed life events like marriage and having children that would typically trigger a home purchase.
Only six cities on Bankrate’s list had higher homeownership rates than the second-quarter national average.
A report earlier this month from Lendingtree found that nearly two-thirds of individuals born between 1980 and 1995 — roughly the millennial generation — had student debt or expected to soon. Average loan payments of $317 per month kept 45.31% of respondents from purchasing a home. Economists told Construction Dive this month that rapid growth in household formations among older millennials is causing a rise in rental demand that’s pushing up prices in that market, too, and should encourage them to move into the for-sale market as the investment value of a home becomes more apparent.
Lenders are responding with mortgage options that recognize the high earning potential of today’s first-time buyers despite their inability to save up significant cash for a conventional down payment.
In a third-quarter survey of consumer sentiment on housing, the National Association of Realtors found that fewer than 20% of respondents were aware of down-payment plans requiring 10% or less of the home’s purchase price. More than one-third of millennials surveyed thought that they needed to put down 20% to purchase a home.