Clever Real Estate’s “2021 Millennial Home Buyer Report,” found that while millennials are keen on purchasing homes that are more spacious and comfortable, they are also anxious about homebuying, because they’re still unable to afford a traditional 20% down payment.
The study, authored by Clever’s Content Writer Michelle Delgado and Data Science & Research Product Manager Dr. Francesca Ortegren, indicated that although millennials have more money stocked away in savings, nearly a year into pandemic-induced lockdowns, travel restrictions, and other changes to daily life, they remain eager to purchase homes of their own.
For the survey, Clever polled 1,000 people who are planning to purchase a home in the next year about their hopes, anxieties, and compromises they are willing to make to become homeowners.
Key findings of Clever’s study included:
- In a competitive market, millennials are willing to bet on riskier homes, with 71% willing to purchase a fixer-upper, and nearly 80% interested in buying a home sight unseen.
- Compared to last year, nearly four times as many millennials (40%) cited low interest rates as the reason they’re currently home shopping.
- After a year of sheltering in place, millennials are looking for homes in the 2,400 square foot range—a 41% increase from last year.
- In terms of bank accounts, 57% of millennials have more than $10,000 in savings—a 36% increase from last year. However, two-thirds were planning on putting less than 20% down on their homes.
- With regards to student debt, 77% of millennials had this type of debt—and of these, more than 80% said that $10,000 in student loan forgiveness would make an impact on their finances.
- Slightly more than 50% of the millennials polled said they were stressed and anxious about the prospect of homeownership—with nearly half fearing hidden costs could derail their finances.
“If millennials are determined to put in an offer on a home sight unseen, they should at least require an inspection contingency,” said the authors of the study. “This would allow them to back out if the inspection revealed major issues such as water damage, structural problems, or other costly repairs.”
With mortgage rates still below the 3.0% mark, the ability to lock in these record-low rates are driving millennials to take a gamble on properties sight unseen. Short supply and the increase in demand have resulted in bidding wars over these homes in a time that was recently described by Faith Floyd, a Redfin real estate agent in Houston as “the best and the worst time to buy.” Clever found that 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.
Millennials are not just looking for homes, they are seeking larger spaces that allow them to work and play at home more comfortably. With more people working remotely during the pandemic, they're twice as likely to require dedicated office space this year compared to last.
One of the primary barriers to achieving homeownership among millennials, student debt remains paramount, as 77% of those polled by Clever claim they are currently paying off student loans. Nearly one-third of millennials (31%) worry that student debt will be an obstacle to homeownership.
In order to curb this issue, on his first day in office, President Joe Biden instructed the Education Department to suspend federal student loan payments through September 30. And with loan forbearance periods in place since March of 2020, many millennials have been able to put money away for a home instead of paying toward their student debt. More than 80% of millennials surveyed said President Biden’s $10,000 student loan forgiveness plan would make an impact on their finances, including their home-buying plans. For 23% of millennials surveyed by Clever, $10,000 in federal student loan forgiveness would wipe out their remaining student loan debt entirely.
Click here to read more of the study by Clever Real Estate.