Millennials say they want to own a home “some day” but do they…really?
The Urban Institute recently released a study on wannabe homeowners. It found that 37% of Millennials wanted to be homeowners, that 45.4% of Gen Xers wanted to own a home and that 45% of Baby Boomers wanted to own a home.
Here are some of the generational/demographic distinctions found by the Urban Institute that may sway or dissuade a potential buyer to pull (or not) the switch on homeownership.
- Marriage – increases likelihood of homeownership by 18%
- The median age of millennials who are married is close to 30 years.
- In 1960’s, the median age for marriage was early 20’s.
- Millennials are 3X more unlikely to have been married than those 70’s and 80’s years old.
- Just 57% of first-time buyers in 2017 were married, compared to 75% in 1985.
- Unmarried couples were 16% of first-time buyers in 2017. This is the highest percentage of unmarried couples who bought homes ever, according to the National Association of REALTORS®.
- Single moms and/or women were 25% of first-time buyers in 2017.
- Children – having a child increases a person’s chances of owning a home by 6%.
- In 2015, 25% of married couples ages 18-34 who were homeowners had a child or two or more.
- In 1990, 37% of married couples ages 18-34 who were homeowners had a child or two or more.
- Median Credit Scores – higher scores translate into higher homeownership rates.
- Millennial median credit scores – 640
- Gen Xers median credit scores – 662
- Boomers – median credit scores – 728
- Ethnic diversity – Millennials are the most ethnically diverse of all demographics groups…ever.
- 39% of white millennials are homeowners.
- 5% of black millennials are homeowners.
- Student loan debt – the higher the student debt, the lower the chances of homeownership.
- Home ownership declines by 15% points when student loan debt increases from $50,000 to $100,000.
- Home owning parents – having home owning parents increases a person’s chances of owning a home by 10%.
Millennials reported that the main barriers to homeownership, as reported by the Urban Institute, are…
- Can’t afford the down payment – 53%
- Can’t qualify for a mortgage – 33%
- More convenient to rent – 28%
- Cheaper to rent – 26%
- Plan on moving soon – 24%
- Too large a financial risk – 23%
- Prefer to rent – 21%
- Looking to buy – 11%
- Other – 11%
Meanwhile, the Bank of the West just published research on millennials who had already pulled the trigger on homeownership. This study found that 40% of millennial homeowners were not happy with their decision to buy and that 68% of millennial homeowners felt buyer’s remorse about her/his decision to own.
Here are some of the reasons that millennial owners feel regret and/or buyer’s remorse about buying a home:
- Millennials overspent on their down payment. One third of those over-spenders dipped into their retirement accounts to do so.
- They underestimated ongoing homeownership costs. It’s a huge transition going from the fantasy of homeownership to the realities of homeownership.
- A full 50% of millennial homeowners had regrets about the house itself. 20% were frustrated by the damage found after they’d moved into the house.