Millennials made up the largest share of homebuyers in 2020 by far, according to the National Association of Realtors’ 2020 Home Buyers and Sellers Generational Trends Report. Out of all homes purchased in 2020, 38% were purchared by those in the millennial generation—those currently in the age range of 24-40 years old.
While this may signal that millennials’ finances are looking up, this is only partially true. Clever Real Estate’s annual Millennial Home Buyer Report found that, although millennials have more money overall in savings than they have in the past, they’re still anxious and stressed about home buying—especially because many are still unable to afford a traditional 20% down payment. Let’s dive into more on the state of millennial homebuyers in 2021.
They want to buy
Nearly one-third of millennials (30%) say COVID-19 pushed them to begin house hunting earlier than they originally planned. But home prices increased 8.4% in 2020 and are projected to rise an additional 10.5% in 2021.
Despite this, they see low interest rates as the push they need to get into a home. For 40% of millennials—nearly four times as many compared to last year—low interest rates are the biggest factor motivating them to buy a house.
They want space…
Although the pandemic caused us all to spend more time in our homes than we may have liked, millennials are more likely to live in cramped apartments or smaller rentals. And now, they’re looking for more space. According to Clever’s report, millennials want homes around 2,400 square feet—a 41% increase from before the pandemic.
But, they need homes they can afford
The problem is, 56% of millennials want homes under $250,000—despite the current average U.S. home value of $266,104. They may have trouble finding these large homes for a price they can afford, especially with the amenities they desire
- a garage (61%)
- large kitchen (60%)
- outdoor living space (45%)
Thankfully, millennials seem to be willing to DIY. Seventy-one percent would be willing to buy a fixer-upper. A whopping 80% would consider buying a home sight unseen, and 29% would buy a house after only seeing photos or a virtual tour. However, this DIY mentality and millennials’ bank accounts don’t translate well to larger home projects and expensive repairs—like a new roof.
They’re still feeling the effects of recession and student loans
The millennial generation suffered greatly from the Great Recession, which left more than 15% of them out of work in their early 20s. Although most have found work since, economic studies reveal many of their finances are still lagging.
More than 70% of millennials have at least one source of long-term debt, and 30% have more than one they are striving to pay off or refinance, often including student loans, revolving accounts, and unpaid medical bills. Eighty percent said President Biden’s proposed $10,000 in student loan forgiveness would have an impact on their finances, and 23% said it would wipe out their student loan debt entirely. This would give them more buying power toward what 80% of them say is part of the American Dream—owning their own home.
They can’t afford the traditional down payment…
While lots of millennials desire to buy a home, their savings make it difficult. Historically, it has been suggested to put at least 20% down on a home to avoid paying private mortgage insurance (PMI) or quickly going underwater if the market changes.
However, more than two-thirds of millennials (67%) say they aren’t planning on putting 20% down on their home—probably because they don’t have enough savings to cover the cost. Compared to last year, millennials are 80% more likely to pay less than 5% upfront. According to data from the 2019 U.S. Financial Health Pulse consumer survey, only 24% of millennials are considered financially healthy—meaning they are “spending, saving, borrowing, and planning in a way that will allow them to be resilient and pursue opportunities over time.”
Fifty-one percent of millennials say saving for a down payment is the biggest barrier to buying a home. In fact, 11% have less than $1,000 in savings—although this is down from 26% before the pandemic.
But they do have more in savings
It’s not all bad news—57% percent of millennials now have at least $10,000 in savings—a 36% increase from last year. These savings come from traditional strategies and COVID-related funding including:
- gradually saving a portion of income over time (79%)
- cutting back on non-essential spending (49%)
- COVID-19 stimulus checks (33%)
Millennials are making progress but still lagging
Although millennials seem to have made strides in their savings accounts during the pandemic, this is likely due to decreased spending and stimulus checks, not an increase in income, a raise in job status or other long-term effects.