By Tim Werth
In recent years, people have continuously been saying that millennials aren’t buying homes. However, that isn’t the case at all. In fact, in 2017, millennials and Gen Yers accounted for about 34% of home buyers. But are millennials really happy with being homeowners? A new study says buyer’s remorse among millennials, those between the ages of 21 and 34, is on the rise when it comes to owning a house.
Bank of the West conducted a recent survey that shed some light on millennial homeownership. According to the survey, four out of 10 millennials agreed that they made a poor financial decision when they decided to buy a home. And why are they showing buyer’s remorse? Well, many millennials are risking their retirement by dipping into their retirement funds to pay for a down payment.
“Borrowing from your retirement may make sense in special circumstances, but it’s definitely not a recommendation… The fact that nearly one in three millennials who already own their homes have dipped into their retirement nest eggs to finance their down payment is alarming.” Ryan Bailey, head of Bank of the West’s retail banking, explained to CNBC.
Despite financial setbacks, Millennials have a strong desire to become homeowners. In fact, 56% of millennials said that becoming a homeowner was the main ingredient in achieving their “American Dream.” But at the same time, 49% of millennials say that being financially stable enough to retire comfortably is a priority as well — which they’re jeopardizing by using retirement funds to pay for their home.
Of course, there are ways to ensure a home purchase is worth it. Remodeling and renovations can significantly increase property value, with Home Advisor showing that a basement remodel can have an ROI of up to 70%. But despite two-thirds of homeowners currently having plans to renovate, millennials don’t really have the money to do any of these projects to make their investment worth it.
So what exactly is making millennials regret their home purchases? First off, 68% of respondents said they wish they were more prepared when deciding to make a purchase. Oftentimes, homebuyers can underestimate how much work is going to go into being a homeowner, along with how expensive owning a house really is. Additionally, 44% agreed that they felt stuck once they closed the deal. Along with that, they also realized there was damage to the home that they hadn’t noticed before, causing them to put even more money into the home. And lastly, 41% felt they were stretched too thin financially, which lead them to dip into additional funding.
Past studies have shown that millennials have several reasons for wanting to buy a house. One popular response was that they wanted houses, not for their kids or future families, but for their dogs. That’s right, millennials just really want to be one of the 70 million U.S. households that have dogs. But millennials seem to have poor luck when it comes to deciding when to buy a home. The survey found that when housing prices were extremely low and interest rates were around zero, most millennials weren’t ready to close on a home.
But despite the slight buyer’s remorse millennials are experiencing, 59% agreed that buying a home was still a better option financially than renting. And millennials are still confident in their ability to utilize financial products, like stocks. Two-thirds of respondents said they would be able and willing to invest in stocks, and about half had the same response about more complex options.
However, millennials aren’t doing the best they could be when it comes to saving and preparing for retirement, with only 40% saying they take advantage of workplace retirement account options. Experts say millennials should be utilizing their younger years to grow their savings so they’re prepared when retirement comes.
So, are millennials buying houses? Yes. Are they regretting it? In certain ways, yes. But millennials homeownership is expected to continue to rise and experts hope they go about it carefully.
Tim Werth is an analyst at Hubshout.
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