Although the millennial generation has often been blamed for killing a multitude of industries and single handedly tanking the real estate market, the truth is that many of these individuals want nothing more to live out the American dream of owning a home. And according to a recent study, the majority of millennial buyers feel financially ready to do so. However, most of them find out too late that homeownership isn’t as simple as it sounds — so maybe millennials are right to wait to buy, after all.
Although millennial homeownership rates are lower than the rates of prior generations, millennials actually make up the largest share of homebuyers, reports the National Association of Realtors. A new Chase Home Lending study has revealed that 52% of millennial first-time home buyers feel financially prepared for their purchase. Around 70% of those surveyed were even willing to curb their spending in non-essential areas (like on shopping, going to the movies, and spa visits) to ensure they’re able to afford their purchase. Millennials are also moving into smaller cities, which generally have higher unemployment rates and more affordable housing options, to put down roots.
But it’s not all good news. Millennials are more than twice as likely to experience homeownership stress as compared to baby boomer owners. Roughly 51% experience buyer’s remorse, while only 20% of boomers feel the same way. According to real estate site Clever, the top millennial home buyer regret is that their mortgage payments are too high. Approximately 67% of millennial buyers make lower down payments of less than 20%, mostly due to rising real estate costs and student loan debts. Although U.S. household income has grown by 28% during the last 13 years, the cost of living has increased by 30% during that same period. So while they can’t afford to make a larger down payment, they can’t really afford the higher monthly mortgage payments, either.
Another reason millennials regret their purchase? The cost of home repairs and maintenance. Nearly 48% of all homeowners planned to decorate their homes last year, but 80% of millennials say they’re going to renovate theirs during the next five years. Millennials are more likely to buy fixer-uppers, as they cost less, but 43% of young homeowners are surprised by the costs that come with maintaining their homes. This generation is taking on 49% more renovation projects than baby boomers are, which means they’re three times as likely to use a personal loan or twice as likely to use credit cards to pay for the work — thus creating a whole lot more financial stress than they already have.
A separate survey conducted by Zillow actually found even more millennials may regret buying a house. That data revealed that 81% of homeowners aged 18 to 34 had at least one regret pertaining to buying their home, while 65% of people aged 55 and above could say the same.
However, it’s important to note that 61% of millennial homeowners have owned their properties for less than five years. They’re still coming to terms with the pitfalls of homeownership, so researchers say that it isn’t accurate to conclude that this generation is unfit for homeownership. It’s merely just more stressful than they imagined, despite the fact that they really do their homework before buying. Their high stress levels aren’t really surprising, given the financial difficulties they face.
As more millennials prepare to enter the housing market, it will become crucial for them to think carefully before becoming homeowners to ensure they can actually afford the life they want for themselves. With all the barriers to homeownership that they face, they’ll have to plan ahead far more than prior generations were required to before signing on the dotted line.