UNITED STATES – The millennial generation in the United States is currently facing a significant financial hurdle as mortgage debt for this demographic has spiked nearly 20% since the fourth quarter of 2021. This increase comes at a time when millennials are already dealing with the repercussions of having missed out on the historically low borrowing rates during the COVID-19 pandemic.
Since March 2022, the Federal Reserve has introduced 11 interest rate hikes aimed at controlling inflation, which has led to current mortgage rates exceeding 7%. This situation poses a particular challenge for millennials who are entering the housing market for the first time. As of June, the cost of an entry-level home has reached $243,000, requiring an annual income that surpasses the average wage for Americans aged 25-34 by over $10,000.
Bank of America highlights that while millennials’ mortgage debt has surged, Generation X has seen less than a 10% increase and baby boomers’ mortgage debt has remained relatively stable. With homes now averaging at $243,000, a salary of $64,500 is necessary to afford such a property—a figure that is notably higher than what many in this age group earn.
Financial experts are advising those looking to become homeowners to take several proactive steps. They recommend improving credit scores through various methods such as reducing overall debt and especially paying down credit card balances. Additionally, they suggest shopping around for competitive mortgage and insurance rates, which could potentially save individuals hundreds of dollars annually.
For millennials who are wary of directly entering into homeownership under the current economic conditions, there is an alternative path. Fractional real estate investments have been presented as a viable option, allowing participation in the housing market without purchasing property outright. This method can be accessed through online investment platforms, providing a more approachable avenue for investment amidst these challenging financial times.
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Source: Investing.com
