Generational consequences
By: J. David Chapman/August 2, 2018
In a recent survey conducted by Bank of the West, 68 percent of millennials (ages 21-34) who had purchased a home stated they felt buyer’s remorse and regretted their purchase.
They wished they had been better prepared and asked more questions before purchasing. They felt like they lost flexibility and missed the ability to easily relocate. Many said the space they purchased didn’t work for them or the location was less than desirable. Forty-one percent complained of financial regrets, claiming homeownership was a financial burden.
While this research is not academically peer-reviewed and should be taken with a grain of salt, it does provide valuable insight into the generation we have been waiting for to make a difference in our economy. First, we know that millennials feel like they will have to periodically change companies and even geographical locations to earn more money and move up the corporate ladder.
I have often counseled young homebuyers that purchasing a home can sometimes lock them into a location and make career moves more difficult, or even impossible, to consider. This is a major advantage to renting for this generation on their way up. I think these survey responses are representative of their perspective.
Secondly, this generation is marrying and starting their families later. Once this begins, their priorities are likely changing as do their requirements for a home and location, including school systems. Again, I believe we are seeing this represented in their responses to the survey when they state that their space doesn’t work for them and their location is less than desirable.
The third thing we know about millennials is they are more interested in experiences than material things. They have consistently shown a preference for travel opportunities, and having disposable income to experience new things is important. Now they are experiencing the financial realities of homeownership. Transaction costs of purchasing, debt service, property tax, insurance, repairs and improvements are proving to be a sacrifice many are sorry they made.
The concept of the American dream (homeownership, reducing debt, and preparing for retirement) might be changing and might include renting a home to accomplish those last two goals of reducing debt and preparing for retirement.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).