Millennial First-Time Buyers Overwhelmed by the Process
CHERRY HILL, N.J. – As first-time homebuyers prepare to dive into the housing market this year, three in four (75%) admit they’re overwhelmed by the process, according to TD Bank’s First-Time Homebuyer Pulse. Nevertheless, two-thirds (68%) believe it’s a good time to buy, and 52% are already actively searching home listings online, according to more than 850 millennials (age 23-38) who plan to buy their first home in 2020.
Despite an intent to purchase this year, however, many buyers haven’t taken any financial steps. Only half (52%) said they started saving for a down payment and 53% have reviewed their credit report. While 42% established a budget for their purchase, only 30% have spoken with a mortgage lender. When they are ready, 52% say they’d prefer to start their mortgage application in person, while 34% prefer the online channel.
“It continues to amaze me how many buyers begin their home search without first speaking with a mortgage lender,” says Rick Bechtel, Head of U.S. Residential Lending at TD Bank.
Affordability remains a roadblock
Although millennial buyers think it’s a good time to buy, many feel priced out of the market. One in five (22%) said steep home prices in their preferred neighborhood has prevented them from purchasing a home so far, and a third (36%) thought homes were overpriced – and 17% said they haven’t bought a home because they can rent in their current neighborhood but can’t afford to buy there.
Buyers’ perceptions of the housing market are shaped by their current living situations – whether at home with their parents (19%) or in rentals (78%). Almost three out of four (70%) said their expectations for a first home are higher because of amenities where they currently live, and a majority would prefer to delay the purchase of a home until they find the ideal place (84%).
2008 housing crisis linger in buyers’ minds
Despite their relatively young age at the time of the housing crisis, many millennial buyers are acutely aware of its impact, and 67% are familiar with the housing crisis. Among that group:
- 55% said their family or a family they knew lost a home
- 47% said growing up during the crisis made them more nervous to purchase a home
- 70% said they view the housing market as fragile
As a result, many millennial buyers see personal and professional stability as prerequisite to buying a home. Buyers worried about job stability (51%) and the stability of their relationship with a significant other (35%) when thinking about home buying. Looking outward, top worries included the state of the economy (57%) and potential changes in policies due to the 2020 election (47%).
Parental support, guidance
Parents are playing a large role in their children’s homebuying process, from doling out advice to providing temporary housing and financial support.
More than a third (37%) of buyers said they regularly ask their parents for advice about homebuying, and nearly half (49%) said their parents are chipping in by contributing to a down payment, closing costs, monthly payments or co-signing the loan. Notably, 85% of buyers who said their families lost their home during the 2008 housing crisis said they will receive financial help from their parents.
“The millennial cohort of homebuyers is unlike any other in history,” says Bechtel. “They grew up during the explosion of personal technology, the fall of the housing market and the renaissance of the rental market. And as our survey found, their expectations of homeownership are shaped by all of it.”
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