Generation Y expected to drive the real estate market over next decade

Many of them wear multiple piercings, own cell phones that take pictures and they're even more technologically savvy than their older brothers and sisters of Generation X.

They're Generation Y – and many of them are going to be your customers very soon.

The label "Gen Y" roughly refers to those born between 1979 through today. And at 60 million strong, more than three times the size of Generation X, they're the biggest thing to hit the American scene since the 72 million baby boomers.

Real estate experts like Rick Davis, President of the Homeownership Alliance, a coalition of professional associations dedicated to expanding homeownership, predict that Generation Y is one group that will drive home sales over the next decade. And enough of them are buying homes already. The number of sales to buyers under the age of 25 rose to 345,000 in 2003, up 20 percent from 287,000 in 2001, according to the National Association of REALTORS®' (NAR) statistics. Sales to that age group outpaced home sales in general, which rose 15 percent from 2001 to 2003.

There are a lot of factors playing into this trend. Of course, we can thank the low interest rates and flexible loan options for much of the growth in this age group. But there's also been an increase in homeownership education efforts by the media, the Department of Housing and Urban Development (HUD) and realty firms.

Further, there's more awareness nowadays of the investment and tax break advantages of owning one's own home. Plus, many of them are just plain tired of seeing their money disappear in rent each month.

Some of them do run into problems getting qualified for loans. Thanks to easily accessible credit and the abundance of electronic toys, gadgets, clothes and other products marketed specifically to them, Generation Y is the group with the most debt in the U.S. In fact, a recent Federal Reserve survey of consumer finances found that the average credit-card debt among young adults (ages 18 to 24) was $2,985, more than double 1992's debt. Among 25- to 34-year-olds, the average credit-card debt was more than $4,000.

And qualifying for a mortgage can be particularly difficult in areas with soaring home prices like Southern California where the median price for an existing single-family home in San Diego is about $567,000, according to the California Association of REALTORS®. While that surge in property values is building equity for their homeowner parents, many Gen Yers are having a hard time finding the cash to enter the market and many of them are forced to live at home.

But in some cases, mom and dad can help foot the bill for their Generation Y child's home. Some parents qualify for the Federal Housing Administration's (FHA) so-called "kiddie condo" program, which allows a 3 percent down payment and tax break if they cosign a mortgage for their college-enrolled children. Parents see the home as an investment that will pay off more than shelling out $300 to $400 a month for a dorm room or apartment rent.

No matter what their financial status may be currently, Gen Yers tend to have lofty financial and personal goals and fully expect to meet them, according to the book, In Managing Generation Y, by Bruce Tulgan and Carolyn A. Martin, Ph.D. In fact, most surveys of Gen Yers report that they expect to earn very high salaries by the time they are 30 years of age. And with high salaries come big houses with big mortgages.