Providing custom mortgage credit reports, related services & technology solutions for over 75 years.

800-243-0120

Search Avantus.com

How do millennials feel about buying a home?

April 19, 2019

Young adults have been a growing part of the housing market for some time now, after years on the sidelines due to the recession and their unique financial stresses. But with the spring shopping season now well underway, it appears millennials are poised to be the driving force behind a huge percentage of real estate sales in the coming months and beyond.

While a healthy percentage of the millennial generation is now able to buy at least lower-priced starter homes, making such a purchase is an aspiration for the vast majority of their peers, according to the 2019 Millennial Home Buyer Report from Clever Real Estate. Indeed, 84% of millennials think being a homeowner is an important part of achieving the American Dream and similar studies show it's more important to them than getting married or having kids. As such, their preferences in homebuying could shape the market for some time to come.

"84% of millennials think being homeowner is an important part of achieving the American Dream."

What do millennials want?
However, while more than 1 in 5 millennial homebuyers this year are not making such a purchase for the first time, the vast majority are, the survey found. That said, 82% of respondents to the poll noted they want to be able to find more information online about buying a home, as well as help from real estate agents as they go through what could be a months-long process. Similarly, 63% of young adults say they would lean most heavily on their smartphones for doing research.

In addition, it's worth noting that shoppers from Generation Y don't seem to be too picky about the homes they'll buy; two-thirds would make an offer on a home that was in need of "major repairs," as long as it met other standards for them, the report said. However, as has been the case for some time, most cite the inability to build a large enough down payment as their biggest obstacle when it comes to homeownership.

Relative to other generations
These days, it seems millennials actually want to buy homes more than any other generation, according to a survey from Nerdwallet. While 3 in 4 Americans say this is a priority for them overall, that's true for 82% of Gen Yers. The number compares favorably with the 75% of those in Gen X and 69% of boomers. While such a purchase may not be imminent for everyone in the younger generation, nearly half of millennials say they have a plan in place to buy within the next five years, dramatically outpacing Generation X (slightly more than 1 in 3) and boomers (about 1 in 6).

Millennials also seem to do a better job of recognizing the value of long-term homeownership, the report said. In all, 56% indicated they felt long-term homeownership with rising equity was more important to them than having a lot of money in their retirement savings. Put another way, it seems millennials are more likely to put extra income toward a down payment than a 401(k) or other long-term savings vehicle.

"The goal of every homeowner is to one day sell your house for more than you paid for it," Nerdwallet mortgage expert Tim Manni noted. "And there are a number of things homeowners can do to help boost their value. But before you start sinking extra income into your home, be sure you're also contributing to retirement and your emergency fund has at least a three-month reserve."

A smart move
Recent data from the Urban Institute shows that buying a home before the age of 35 brings with it some serious long-term financial advantages, showing why millennials are smart to try to buy as soon as possible. People from older generations were far more likely to buy a home before their 35th birthday than millennials; half of those now over 60 bought when they were between 25 and 34, and more than a quarter bought earlier than that. More recently, that number slipped to 37% of millennials, and just 13% of people under 25.

Among people over the age of 60 today who bought before turning 35, the median home equity they've built up since they made their purchases decades ago is around $150,000, the data showed. But older people who made their purchase between 35 and 44 have only seen their equity grow $72,000, showing just how much the extra decade of property value appreciation will help them build wealth. Likewise, it stands to reason that those who were able to buy earlier also have more expensive homes in general, and carry less mortgage debt into their 60s.

"Older millennials have a median household income of more than $101,000."

Getting it right
With the clock ticking for locking in a home purchase before older millennials hit 35 en masse, it's good news that many of them prioritize such a purchase and are actively working toward it. The National Association of Realtors' most recent Home Buyer and Seller Generational Trends found the older half of the millennial generation now has a median household income of more than $101,000 and are now finding themselves in a better position to more quickly build a down payment.

"Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this," said NAR chief economist Lawrence Yun. "Their choices are falling more in line with their Gen X and boomer counterparts."

Currently, younger millennials say saving for a down payment is the hardest part of the home purchase process, cited by more than a quarter, and 61% say student loan payments are a major impediment, the report said. However, those who actually made the purchase already noted that they thought education debt only held them back from making a purchase for a year or two, often because they received sizable cash gifts that allowed them to more quickly build their down payments.

As a consequence of shifting economic realities, 26% of all buyers today are older millennials, and 11% are younger Gen Yers, the report said. Combined, they make up a bigger portion of the buying market than any other generation, including baby boomers (32% combined, or 18% and 14% when broken down into younger and older boomers, respectively).

With all this in mind, young people considering trying to buy a home in 2019 would be wise to speak with a real estate agent and mortgage lender as soon as possible. This kind of additional information from industry professionals could be vital to helping them get a true understanding of what they need to do to fully prepare for a purchase in the months ahead.

 

 

 

If you liked this article, consider signing up for our weekly Buzz recap email! Sent every Friday morning, it's a quick way to catch up on all the industry news and happenings at Avantus. Click here to sign up!