Millennial homebuying survey
By: J. David Chapman/January 30, 2020
I recently had the pleasure of assisting my 24-year-old daughter purchase her first home, so I found the recent survey about millennial first-time homebuyers, commissioned by TD Bank, interesting. Millennials are the demographic cohort born in the early 1980s to the mid-1990s. Because they are right in the middle of their first-time homebuying years, we are very interested in their buying patterns.
More than two-thirds of millennial first-time homebuyers believe that now is a good time to buy a home, but 75% say they are overwhelmed by the process. This may indicate we have not educated them properly or that the process is simply too complex. I frequently hear them say it looked significantly easier on the HGTV shows.
Unfortunately, this keen attitude about buying a house is not replicated in their preparedness for the financing of their home. The TD Bank survey reveals that only 52% have started saving for a down payment and only 53% have reviewed their credit report. Just 42% of potential buyers have worked out their homebuying budget and only 30% have spoken with a mortgage lender, although 52% say they prefer to start their mortgage application in person with a lender rather than use online channels (34%). My personal opinion is that using a mortgage professional, in person, and a reputable real estate broker will cure much of the feeling of anxiousness they experience when purchasing a home.
Besides the overwhelming feeling, many millennial respondents feel challenged by affordability. One in five said that they hadn’t bought yet due to the high prices in their chosen neighborhood and a third of those respondents thought homes were overpriced. For 17%, they like living in their current neighborhood, but can’t afford to buy there. Eighty-four percent stated that obtaining the amenities in their current neighborhood was worth delaying the purchase.
Not surprising, the survey found that the reality of growing up during the explosion of personal technology, the housing and financial crisis, and renaissance of the rental market has affected their perspective of personal finances, job security, and economy stability on purchasing. Probably more than any other group before them, this group of potential homebuyers is also relying on their parents’ insights about the housing market and receiving their help with homebuying finances, including down-payment and monthly mortgage payment contributions.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).