It seem the world has been waiting for Millennials to grow up. To be old enough to drive (and to spend $ billions on buying cars), to get jobs, to buy homes. This year, the oldest Millennials turned 36-years-old, and more than 6 in 10 Millennials have turned 26, putting them squarely in prime home-buying years.
Still, Millennial homeownership rate is at an all-time low, currently at 34%, down substantially from the 2005 high of 43% among people then at the same age. Multiple recent reports, including here, here, and from our own research consistently reinforced that Millennials indeed want to own home, but a combination of economic, cultural and life-stage factors have delayed their homeownership entrance.
Recently, a new study from TransUnion found that more Millennial renters are getting their credit ready to buy homes. Our reaction and question is: we know they have the desire to buy, but do they have the confidence to stomach it?
According to ValueInsured’s latest quarterly Modern Homebuyer Survey conducted in Spring 2017, 8 in 10 (81%) Millennial renters would like to buy a home, and 74% would like to buy “now” if they could afford to. So it’s certainly not a desire issue. However, affordability challenges aside, Millennials seem to lack the confidence that buying a home now is a sound decision.
Overall, Millennial renters who want to convert to homeowners appear to believe buying is more financially sound than renting. But the confidence in buying seems to end there:
- Among all Millennials who currently rent but have a desire to buy a home in the near future, 71% express confidence buying a home is more financially beneficial than renting, and 69% believe buying a home is one of the best investment for themselves and their family. So they have confidence in the general concept and benefits of homeownership.
- However, these same Millennial renters’ confidence appear to retreat when asked more specifically about buying in the current housing market. Only slightly more than half (52%) believes buying a home in their neighborhood now is a good investment.
- Less than half – or 46% – believe if they were to buy a home today, that home would be worth more by the end of 2018. This is hardly a vote of confidence.
- More pointedly, less than one third – or 31% – say they are confident there will not be another 2008-style housing crisis in their lifetime. In other words, more than 2 out of 3 Millennial prospective homebuyers do not rule out the possibility of experiencing another major housing crisis.
- About half of Millennials who hope to buy appear held back by concerns that, should their plans change after they buy, they could end up selling at a loss during a downturn. 51% say they are concerned about a possible job loss or job change that would make buying a home risky. 55% say they would speed up their process to buy if they could be more certain they would not lose their down payment even if the market goes through a downturn after they buy.
As home prices continue to move up, and more markets are rated over-heated or "overvalued", it would be interesting to see if Millennial renters who want to buy would eventually become desensitized and dive right in, or if the opposite would happen and they could lose their confidence to stomach buying at potentially the top of the market. We will have more answers – and latest data – two weeks from now when we release ValueInsured’s July/Summer 2017 Modern Homebuyer Survey.