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A recent 2018 Bank of the West study dealing with the buying habits of millennials indicates the equity-shy demographic is now turning to real estate as the cornerstone of their investment portfolio. Homeownership is emerging as the most popular ingredient of their American Dream (56%), followed by debt pay-off, and the goal of a comfortable, early retirement (49%) as the second and third most critical components.
The study shows how millennials’ desire to own a home is pushing some to risk their other goals by taking on mortgages, with one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.
Builder Magazine quoted Ryan Bailey, who heads up Bank of the West’s Retail Banking Group. “Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face. 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.”
The study suggests millennial homeowners may be rushing into a home buying decision without asking all the right questions, citing 68% having reported buyer’s remorse regarding ill-prepared going into the purchase and 44% have issues with space itself. Many feel that soon after they closed escrow, they felt stuck in one place with a house that either had unnoticed damage or didn’t work for their family. A full 41% cited financial regrets, saying they felt stretched too thin financially, either dealing with home maintenance expenses or not having waited long enough to save up for a larger down payment.
“A white picket fence or other fencing options can certainly be a smart investment. To help avoid buyer’s remorse, millennials should consider covering their bases and kick the proverbial tires—reflecting on their physical and financial wishes for their home before they sign on the dotted line,” said Bailey.
According to the Builder article, timing has worked against millennials when it comes to home-buying. Most weren’t ready to close on a home when housing prices were at their lowest, and interest rates hovered just above zero. For those who may feel ready to buy now, the new Tax Cuts and Jobs Act eliminates some of the homeownership tax breaks (deducting state and local property taxes from federal tax bills) their parents enjoyed.
Despite these setbacks, 4 in 10 millennials in the study are already homeowners, while the rest remains interested in someday owning a home (92%). Despite the housing crisis when home values fell like rocks, 59 percent still believe it is a good investment or say it makes more financial sense to own than rent.
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According to the article, 69% of millennials in the study believe debt-free status is the ultimate dream. 58% say they pay off their credit card balances in full each month, while they try to avoid credit cards in general and are most likely to use cash, checks, or debit cards (59%).
Bailey goes on to say that debt doesn’t have to be a dirty word. “By responsibly borrowing the amount that is just right for their financial situation, millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”
Parker Associates works extensively on understanding your market, your consumer, and your goals. We don’t just make it up, we take the time and commit the resources to researching the market and the consumer to make sure we get it right. We are YOUR advocate by being the CONSUMER’S advocate.
Spend time looking at what you are trying to acquire, develop, or sell to learn how you can improve the success of what you are offering. Parker Associates helps understand the consumer by answering WHO will buy, WHAT they will buy, and HOW they will buy it. When the research is completed and the analysis is done, having the answers to these questions will reveal what will provide the best success for your project. Keep asking WHO, WHAT, and HOW and keep developing to fit the need.
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Chris Parker is a principal of Parker Associates of Jacksonville, Florida, marketing consultants to the real estate industry; Sales Trainer, and an active real estate sales professional with PARFAM REALTY based in Jacksonville, FL. He can be reached at 904-607-8761 or via email jchris@parkerassociates.com.