How the market changed millennials’ home-buying plans | Why millennials would buy sight unseen | How much will millennials offer over asking price? | Betting on riskier homes versus home buyer regrets | Financial barriers to homeownership | Why millennials want smaller homes | Home buyers’ top concerns
🔑 What would millennials do to own homes?
Millennials are willing to make rash decisions to afford a home in a competitive market, including buying a home sight unseen (90%), purchasing a fixer-upper that needs major repairs (82%), and offering over asking price (80%).
The 2021 housing market was the most lucrative — and competitive — ever recorded in U.S. history.
Fierce demand driven by historically low interest rates combined with limited inventory made conditions ripe for a boom. Home values swelled at a record-setting pace, spiking nearly 20% from September 2020 to September 2021. The historic rise exceeded the former highest yearly increase of 14%, which came prior to the 2008 crash. Although the market is starting to cool, buyers still face many obstacles.
A wave of first-time millennial home buyers entered this explosive market eager to own homes and raise their families. But to afford homeownership in a competitive market, millennials are willing to take risks, including buying a home sight unseen (90%), purchasing a fixer-upper that needs major repairs (82%), and offering over asking price (80%), according to our new data.
The most common way millennials responded to the market was by increasing their budgets, with 46% expecting to max it out completely. We found that one-third (33%) plan to purchase a home that costs more than around $405,000 — the median U.S. home price.
But desperate buyers who rush into home purchases are more likely to experience financial remorse. About 1 in 4 millennials who already own a home regret that their mortgage is too expensive.
To learn more about millennial home buyers, we asked 1,000 people who are planning to purchase a home in the next year about their plans, anxieties, and compromises they’re willing to make to own a home.
We compared this data to previous years to provide a clear snapshot of millennials’ home-buying experience — and the obstacles that may stand in their way.
🏡 Millennial Home Buyer Statistics
- 90% of millennials would buy a house sight unseen, a 10% increase from 2021.
- 1 in 6 millennials would be willing to offer $100,000 or more above asking price for their dream home.
- Nearly half of millennials (46%) expect to max out their budgets when buying a home, with one-third (33%) planning to purchase a home that costs more than the median U.S. home price of about $405,000.
- Millennials (82%) are more likely than boomers (62%) to purchase a fixer-upper, but 1 in 4 who do so regret it.
- 82% of millennials have more than $10,000 in savings — a 25% increase from last year — but one-third plan to put down less than 20% on their homes.
- 92% of millennials have some debt. Of those, 70% have more than $10,000 in debt, and 1 in 3 owe more than $50,000.
- As millennials spend less time at home, they want smaller homes — 1,700 square feet on average, compared to 2,400 square feet a year ago.
- More than half (51%) of all respondents feel stressed or anxious about homeownership, with more than 40% fearing a potential housing market crash.
- Nearly one-third of millennials (31%) plan to live in their homes for less than five years.
Nearly 85% of Millennials Aren’t Buying a Home When Planned
Millennials who are serious about purchasing a home are evenly split about when to buy: 42% are buying earlier than planned, and 42% delayed their plans to buy.
Of those who are buying early, many are motivated by financial reasons. Home buyers are spending their hard-earned cash on overpriced homes that may not fit their needs, just to secure a place to live before prices become even more expensive.
Others want to take advantage of low interest rates. Mortgage rates, however, aren’t motivating as many millennials to buy as rates tick back up. Respondents who are buying because of low interest rates dropped from 40% in 2021 to 33% in 2022.
Social factors also influence millennials’ desire to purchase a home: 37% are motivated by the need to start a family, and 27% want to keep up with friends who are buying homes.
Nearly half of millennials (46%) are buying a home because it’s a good investment.
Millennials who are delaying their home purchase are doing so because they are worried about finding affordable homes (43%). Many have been priced out of the market or outbid by other buyers.
Besides altering home-buying plans, the market has prompted millennials to:
- Expand their search location (47%)
- Increase their budget (46%)
- Make sacrifices to afford homeownership (45%)
- Sell their house for a much higher price (42%)
- Decrease their desired square footage (34%)
90% of Millennials Would Buy a Home Sight Unseen
In a normal market, home buyers could tour a property then think about their decision for a few days before submitting an offer. But homes sold at a rapid pace in 2021. Listed homes spent an average of 17 days on the market, compared to 21 days in 2020 and 38 days in 2019.
In an effort to move quickly, 90% of millennials said they’d buy a home sight unseen, compared to just 70% of boomers. That number is up significantly from a year ago when 78% of millennials said they’d purchase a home without touring it first.
Sight-unseen homes aren’t without risks, and millennials said they would only consider it under the right circumstances. Millennials said they could be convinced to buy a home sight unseen if:
- The home was listed at a great price point (56%)
- The home was a new build with no previous owners (56%)
- The seller offered concessions such as paying for closing costs, waiving inspection fees, or offering repair credits (49%)
- There was high competition from other buyers (48%)
- They could lock in low interest rates (43%)
- They were unable or unwilling to travel (31%)
- They disliked their current living space (24%)
Buying a home without touring it in person isn’t ideal, but it can be done thanks to today’s technology. Of those who would buy a home sight unseen, 71% said they’d need to see a live or pre-recorded virtual tour before making an offer.
In addition to virtual tours, a majority of home buyers (63%) would want to view photos before making an offer, with 1 in 25 saying they’d consider buying a home after seeing only online images.
1 in 6 Millennials Would Offer $100,000 or More Above Asking Price on Their Dream Home
At the height of the home-buying frenzy in April 2021, nearly 75% of offers written by real estate agents faced competition. Although that number dropped below 60% by August, nearly half of millennials (47%) anticipate bidding wars and competition from other buyers to continue at a high rate in 2022. As a result, 43% expect to pay more than asking price on their dream home.
Millennials are much more open to making an offer above asking price than boomers. The younger generation (17%) is 8x more likely than boomers (2%) to offer $100,000 or more over asking price on the perfect home, while boomers are nearly 3x more likely to offer just the asking price.
82% of Millennials Would Buy a Fixer-Upper — but 1 in 4 Regret It
With a lack of affordable options, millennials are much more likely to buy a home that needs significant repairs: 82% said they’d purchase a fixer-upper, which is a significant leap from the 67% who said the same in 2019.
Boomers are also open to renovating a house, but current market conditions haven’t necessarily swayed them. The percentage of boomers (62%) who said they’d buy a fixer-upper didn’t change from 2021.
Purchasing a fixer-upper might seem like a good investment for millennials on a tight budget, but they can be costly to repair and maintain. About 1 in 4 current millennial homeowners regret buying a fixer-upper.
With more than half of millennials (54%) concerned about making major repairs, there are some conditions that would deter even the most eager buyers. The most common deal breakers include:
- Foundation issues (53%)
- A bad neighborhood (53%)
- A leaky roof (50%)
- Termites (48%)
- Pests such as cockroaches, mice, and spiders (47%)
Hasty Decisions Lead to Regret Among 82% of Current Homeowners
A decision as big as home buying shouldn’t be rushed. But when homes are seemingly under contract the minute they hit the market, 42% of millennials — compared to just 24% of boomers — expect having to make snap decisions, which could lead to choices they’ll later regret.
Of millennials who already own a home, 82% said they have at least one significant regret from their first home purchase.
Millennials are 2x more likely than boomers to have remorse about purchasing a home in a bad location (40%). They also regretted bad neighbors (30%), expensive upkeep (30%), and not being educated about the home-buying process (29%).
Millennials may be more willing to take risks because nearly one-third (31%) plan to live in their next home less than five years — against the advice of financial experts who say home values usually need that long to appreciate enough to cover closing expenses.
But in a hot housing market, values may rise rapidly enough to exceed closing costs much sooner than five years. Selling early could make financial sense and appeal to many millennials who had to compromise on the physical characteristics of their homes because of competition or budget constraints.
Still, 1 in 6 millennials plan to live in their next home for more than 20 years, making risky decisions more costly.
Savings Have Increased, but One-Third of Millennials Won’t Put Down 20%
Millennials have more savings in 2022, but they still struggle to afford a down payment.
Approximately 82% of millennials have $10,000 or more in savings — a 25% increase from 2021 — while the percentage of millennials with less than $10,000 in savings dropped from 42% to 18%.
Still, about one-third of millennials (34%) plan to put down less than 20% when buying a home.
Saving for a down payment is among the three most significant barriers to homeownership for millennials, along with a competitive market and increasing home prices. The top barriers include:
- Competition among buyers (59%)
- Expensive home prices (56%)
- Saving for a down payment (52%)
- Qualifying for a mortgage (45%)
92% of Millennials Have Debt — a Looming Barrier to Homeownership
Home buyers have a wide range of non-mortgage debt, but millennials tend to have more than older generations.
About 71% of millennials have $10,000 or more in debt — compared to 46% of boomers — and 1 in 3 owe more than $50,000.
Of those we surveyed, 92% of millennials have some form of debt. Student debt is the second-highest consumer debt category behind mortgages. Overall, nearly 43 million Americans have federal student loans totaling $1.57 trillion.
However, nearly half of Americans have taken on more credit card debt since the pandemic began, and 37% of millennials we surveyed view it as a significant barrier to homeownership.
Surprisingly, millennials (29%) are 2x as likely as boomers (13%) to be concerned about medical debt.
Millennials may be more prone to this kind of debt because their wealth has stagnated compared to older generations, and they are more likely to be uninsured because of expensive premiums. Of those who are insured, three-fourths said they can’t afford their medical bills.
With so much debt, 1 in 3 millennials worry they won’t be able to qualify for a mortgage.
Millennials Want Smaller, Cheaper Houses as They Spend Less Time at Home
Millennials want smaller, more affordable homes as prices continue to soar in a competitive market.
On average, millennials are looking for homes that are about 1,700 square feet. That’s a significant decrease from last year, when the average millennial sought 2,400 square feet.
Last year’s desire for more space is likely a result of spending more time at home while shelter-in-place and social distance ordinances were in place. But as pandemic restrictions ease and COVID-19 vaccines become widely accessible, millennials are spending less time at home — and therefore need a home with less space.
The 1,700 square feet millennials want in a home is similar to the dimensions they wanted before the pandemic broke out in 2020.
The Market is Slowing, but 98% of Millennials Are Still Concerned
The housing market began to cool in late 2021, but prices are expected to continue trending upward in 2022, just at a slower pace. The latest forecast by Fannie Mae predicts home prices to rise about 8% — well below the 20% growth in 2021 but still above the historical standard of 4%.
Buyers expect many of the same challenges that plagued the market in 2021. Nearly all millennials (98%) who plan to buy a home in the next year said they anticipate significant obstacles, including:
- Making concessions on the characteristics of a home (57%)
- Making offers on multiple homes (52%)
- Making financial concessions (47%)
- Bidding wars and competition from other buyers (47%)
- Maxing out budgets (46%)
More than half of respondents (51%) said home buying made them feel stressed or anxious, with the most common concerns centering around affordability.
More than half of all home buyers are worried about hidden costs of homeownership, while millennials are about 1.5x more likely than boomers to fear decreasing home values (49%) and a potential housing market crash (43%).
Millennial home buyers may find themselves underwater on their mortgages if inflated home prices correct because of a crash or recession. They’ve had little time to pay back their mortgage, and they may owe more on their home than it’s worth.
However, millennials, who had lower rates of homeownership during the 2008 housing market crash, are twice as likely as boomers to view buying a home as a good investment, and it was their top reason for buying a home (46%).
The proprietary data featured in this study comes from an online survey commissioned by Real Estate Witch. One thousand people who are looking to buy a home in the next year were surveyed Nov. 9-10, 2021. Each respondent answered up to 21 questions related to their financial situation and home-buying plans.
About Real Estate Witch
You shouldn’t need a crystal ball or magical powers to understand real estate. Since 2016, Real Estate Witch has demystified real estate through in-depth guides, honest company reviews, and data-driven research. In 2020, Real Estate Witch was acquired by Clever Real Estate, a free agent-matching service that has helped consumers save more than $70 million on realtor fees. Real Estate Witch’s research has been featured in CNBC, Yahoo! Finance, Chicago Tribune, Black Enterprise, and more.
Why would millennials buy a house sight unseen?
Ninety percent of millennials would buy a home sight unseen under the right circumstances, including a great price point (56%), a new build (56%), and seller concessions (49%). Those considering it said they'd first need to see photos, a virtual tour, or have a trusted friend view the home in person on their behalf. Learn more.
How are millennials buying homes?
Millennials who are planning to buy a home are saving for it, with more than half reporting at least $50,000 in savings. Still, millennials struggle to afford a down payment, and about one-third plan to put down less than 20%. Learn more.
How has the market changed millennials' home-buying plans?
The most common way millennials responded to the competitive market was by increasing their budgets (46%). About half sped up their home-buying plans before prices peaked, while the other half delayed their home purchase. Learn more.
What do home buyers regret about purchasing a home?
More than 80% of millennials who already own a home have at least one significant regret. The most common regret is purchasing a home in a bad location (40%), followed by bad neighbors (30%). Other regrets include expensive upkeep (30%) and a lack of education about home buying (29%). Learn more.
What are financial obstacles to home buying?
Millennials' debt is a barrier to home buying. More than 90% of millennials have some form of debt, with more than 70% having more than $10,000 in debt. Learn more.
More Research From Real Estate Witch
U.S. House Prices Are Rising Exponentially Faster Than Income (2021 Data): Homeownership has become increasingly elusive for millennials. Accounting for inflation, home prices have leapt by 118% since 1965, while median household income has increased by just 15%. Find the most affordable metros for housing.
Must-See Clever Real Estate Reviews (Learn The TRUTH!): Want to stand out in a competitive market? A great agent can help. Clever’s free service will match you with top local realtors who can guide you through finding the right home. Read what Clever customers have to say!
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