🚧 What are the barriers to millennial homeownership?
Nearly half of millennials (47%) say high interest rates are a significant barrier to homeownership, and 81% wish they’d bought a home before rates increased.
Inflation Hits Millennial Home Buyers Hard | Financial Barriers to Homeownership | Homeowner Regrets | Saving for a Down Payment | Buying Sight Unseen | Buying a Fixer-Upper | Millennials’ Price Bracket | Offering Over Asking Price | Millennial Debt
Millennial home buyers can’t catch a break. After weathering two economic recessions that delayed their ability to buy a home, they entered one of the most expensive markets in U.S. history.
Fierce demand driven by historically low interest rates and limited inventory caused home prices to soar, and many millennials were priced out of the market or outbid by wealthier buyers.
To tame a hot market, the Federal Reserve began raising interest rates in March 2022, but millennials — the perpetual victims of poor timing — found little relief. The central bank’s move successfully dulled the home-buying frenzy of the pandemic market but triggered a host of new headaches.
Now, high interest rates are millennials’ No. 1 obstacle to owning a home, according to our recent survey of 1,000 home buyers. Meanwhile, just 29% of millennials — compared to 59% in 2022 — expect buyer competition to be a barrier to homeownership in 2023.
We found that millennials are being hit hard by the one-two punch of record inflation and expensive borrowing costs. Nearly all millennials (92%) say inflation has altered their home-buying plans, with more than 1 in 4 (28%) delaying their search as a result.
Three-fourths of millennials (75%) think the housing market is in a bubble that could burst in 2023, ushering in an era of greater affordability. But experts suggest tempering that expectation. Home prices are unlikely to plunge drastically, and borrowing may become even more expensive as additional interest rate hikes are on the way.
It’s not easy to find a home in such conditions, and nearly 3 in 4 millennials (71%) say home buying makes them feel stressed. A majority of millennials (51%) have been reduced to tears during the home-search process, and 44% say it has negatively affected their personal relationships.
To learn more about millennial home buyers, we asked Americans who are planning to purchase a home in the next year about their plans, anxieties, and compromises they’re willing to make.
We compare this data with previous years to provide a clear snapshot of how millennials are contending with new obstacles in a changing market.
🏠 Millennial Home Buyer Statistics
- A majority of millennials (51%) have been reduced to tears during the home-search process.
- 92% of millennials say the current level of inflation has impacted their home-buying plans.
- 3 in 4 millennials (76%) think market conditions will worsen before they buy a home.
- Nearly half of millennials (47%) say high interest rates are a significant barrier to homeownership.
- Buyer competition is no longer seen as a barrier to homeownership, indicating a changing market. Just 28% of millennials say it’s an obstacle, compared to 59% in 2022.
- 82% of millennials who own a home have regrets about their purchase.
- The most common regret among millennial homeowners is that their interest rate is too high (22%).
- Almost two-thirds of millennials (62%) plan to put down less than 20% on a home. Only 34% of millennials did the same in 2022, when they faced stiff competition with other buyers.
- More than half of millennials (54%) have less than $10,000 in savings — a percentage that has tripled since 2022, when only 18% of millennials had that little.
- About 1 in 5 millennials (20%) have $0 in savings.
- The percentage of millennials who would buy a home sight unseen dropped slightly from 90% in 2022 to 86% in 2023.
- About 65% of millennials would buy a fixer-upper — a sharp decrease from the 82% who said the same in 2022.
- About 1 in 6 millennial homeowners (16%) who bought a fixer-upper regret it.
- Nearly 1 in 4 millennials (23%) plan to buy a home that costs more than the national median of $455,000, but to afford such expensive homes, 1 in 3 (38%) anticipate having to max out their budget.
- For their dream home, 1 in 7 millennials (14%) would offer $100,000 or more over asking price, a slight decrease from the 1 in 6 respondents (17%) who said the same in 2022.
- Debt remains a looming barrier to homeownership among millennials, with nearly half (46%) owing $10,000 or more.
Nearly All Millennials Say Inflation Has Impacted Their Home-Buying Plans
Just like any other good or service, home prices tend to rise with inflation. In a housing market that was already considered unaffordable, many millennial home buyers are feeling squeezed even more financially.
As inflation reduces their purchasing power and makes it more difficult to buy a home, 92% of millennials say it has affected their home-buying plans.
Boomers, on the other hand, have greater wealth and are more impervious to inflation. They (17%) are 2x more likely than millennials (8%) to say it has not affected their plans to buy a home.
Although challenging, it’s not impossible to buy a home in a high-inflation market. Millennials are responding to costly economic conditions by:
- Saving more for a home (59%)
- Planning to spend more on a home (36%)
- Delaying plans to buy a home (28%)
- Buying a fixer-upper (26%)
- Buying a smaller home (25%)
Millennials (59%) are 2x more likely than boomers (26%) to save more for a home because of inflation. It’s a predictable move, considering the younger generation of largely first-time buyers has no equity to put toward their purchase.
Yet experts warn that saving more may not be the best strategy. No one knows when inflation will ease, but 3 in 4 millennials (76%) think market conditions will worsen before they buy a home.
In that case, it’s better to buy a home today than in the future — when cash will hold less value and home prices and mortgage rates may be even higher. A surprising majority of millennials (55%) agree with this logic and believe it’s still a good time to buy a home.
However, 96% of millennials remain worried about home buying. Their chief concerns center around homeownership costs — now and in the future — as inflation erodes their savings and reduces their purchasing power:
- 43% of millennials worry they’ll have to pay for major repairs.
- 41% are concerned about unexpected or hidden costs of homeownership.
- 39% worry they won’t be able to find an affordable home.
Although 77% of millennials think buying a home is still part of the American Dream, more than 1 in 3 (37%) don’t believe it’s attainable for the average American.
High Interest Rates Are a Barrier to Nearly Half of Millennial Home Buyers
To curb persistent inflation, the Federal Reserve began months of incremental interest rate hikes in March 2022. The rate rose to 6.3% in December 2022 — nearly double the rate from a year ago — and priced many millennial buyers out of the market.
In fact, nearly half of millennials (47%) say high interest rates are a significant barrier to homeownership.
Among millennials who have been pre-approved for a mortgage, 40% say their rate is higher than expected. Not surprisingly, 81% of millennials wish they’d bought a home before interest rates increased.
As rising interest rates cool buyer demand, desperate millennials can only hope that home prices plunge to offset expensive borrowing costs. Yet in a sad twist, the median home price actually hit an all-time high of $455,000 in the third quarter of 2022 — an 11% increase from the year before.
A lack of affordable housing options is the second-greatest barrier to homeownership, with 46% of millennials saying homes are too expensive.
More than half of millennials (53%) think they can’t afford a home, and a surprising 64% of boomers agree that homes are too expensive for millennials. As boomers downsize and snatch affordable starter homes from younger generations, they may have realized that millennials’ money problems aren’t the result of expensive coffee and avocado toast.
Boomers and millennials may jockey for the same housing stock, but buyer competition is no longer seen as a barrier to homeownership in the changing real estate landscape. Just 28% of millennials identify buyer competition as a barrier, compared to 59% in 2022.
A less competitive market manifests in a number of welcome changes for harried home buyers.
With less demand, only 42% of millennials expect to make multiple offers on a home, and only 29% expect a bidding war. Those percentages are down 52% and 47%, respectively, from 2022.
82% of Millennial Homeowners Have Regrets
Despite financial obstacles and market challenges, millennials have bought more homes than any other generation since 2014, according to the National Association of Realtors.
To land a home, many millennials had to compromise on their priorities or take risks that often led to remorse. Among millennial homeowners, 82% have at least one regret from their first purchase.
The most common regret among millennials is that their interest rate is too high (22%). Nearly two-thirds (63%), however, plan to refinance their mortgage when interest rates decline.
The second-most common regret is not being educated about the home-buying process (21%). About 1 in 4 millennials (26%) say they aren’t knowledgeable about home buying, and 1 in 3 (30%) admit they aren’t knowledgeable about the mortgage process.
As a result, 82% plan to enlist the help of a real estate agent when buying a home.
Millennials also regret:
- Buying a home in a neighborhood that changed too much (21%)
- Buying a home in a bad location (19%)
- Not anticipating their future needs for a home (18%)
Nearly 2 in 3 Millennials Won’t Put Down 20% as Savings Shrink
Rising costs of everyday goods are draining millennials’ savings. More than half of millennials (54%) have less than $10,000 in savings. That percentage has tripled since 2022, when only 18% of millennials had that little.
Additionally, 1 in 10 millennials (10%) have less than $1,000 in savings, and 1 in 5 (20%) have nothing in reserve.
As savings shrink and wages stagnate, millennials struggle to afford a large down payment. Financial experts recommend a down payment of at least 20%, but nearly two-thirds of millennials (62%) plan to put down less than that amount.
The percentage of millennials who plan to put down less than 20% has nearly doubled since 2022, when only 34% of millennial home buyers paid less than 20% upfront for their home.
More Than 1 in 3 Millennials Work Second Jobs to Save for a Down Payment
Saving for a down payment is one of the three most significant barriers to homeownership, with 41% of millennials saying it’s why they can’t afford a home. Millennials, however, are working hard and making sacrifices to achieve their goal of homeownership.
Nearly half of millennials (45%) are cutting back on non-essential spending, and 38% are working a second job or a side hustle to earn additional income.
What’s more, 1 in 8 millennials (13%) are so desperate for a home they’ve stopped paying other bills and are going into debt to save for a down payment.
Despite their efforts, more than 1 in 3 millennials (36%) don’t believe they have enough saved for a down payment.
Nearly All Millennials Would Buy a Home Sight Unseen
Buying a home sight unseen was a common practice in 2022, when making an offer immediately was often needed to secure a desirable home. Although cut-throat competition has largely ceased, the trend of sight unseen offers appears here to stay.
Approximately 86% of millennials would buy a home sight unseen — down only slightly from a year ago, when 90% of millennials would do the same.
Fewer boomers, however, would take that chance now that market conditions have begun to normalize. Just 51% of boomers would buy a home without physically touring the property first. That’s a 27% drop from 2022, when 70% of boomers would have done so.
Buying a home sight unseen remains risky, and millennials say they’d only consider it under certain circumstances. Millennials could be convinced to buy a home sight unseen if:
- The home is listed at a great price point (47%)
- The home is a new build with no previous owner (37%)
- There is high competition from other buyers (28%)
Although buying sight unseen can be a nerve-wracking experience, millennials say it pays off. Only 8% of millennials who purchased a home without physically seeing it first regret it.
The amount and quality of online data makes buying a home sight unseen a more viable option for today’s home buyers. Among millennials who’d buy sight unseen, 70% would need to see photos of the home, with 1 in 9 (11%) saying they’d consider buying a home after seeing only online images.
In addition to photos, 67% of millennials would need to see a live virtual tour, and 43% would need to see a pre-recorded virtual tour.
Predictably, millennials are more likely than older generations to rely on technology, rather than human support, when buying a home sight unseen. Only 1 in 3 millennials (36%) say they’d need a trusted friend or family member to view a home on their behalf before deciding to buy sight unseen, compared to more than half of boomers (58%).
2 in 3 Millennials Would Buy a Fixer-Upper, but 1 in 6 Regret It
Fixer-uppers were once an attractive option when soaring home prices made outbidding other buyers for turnkey properties extremely difficult.
Yet the rising costs of building materials and labor have made renovating a property more expensive, and 1 in 6 millennials (16%) who bought a fixer-upper regret their purchase.
Now, with less competition in a cooling market, fewer buyers are settling for homes they’ll later regret. Only 65% of millennials would buy a fixer-upper in 2023, a sharp decrease from the 82% who said the same in 2022.
Boomers are even less likely to spend their money on a fixer-upper this year, with just 49% saying they’d purchase one, compared to 62% in 2022.
Declining interest in fixer-uppers likely stems from the fact that 43% of home buyers worry they’ll have to make significant repairs on their home. Many millennials, however, aren’t afraid to take risks during uncertain financial times to become homeowners.
A majority say they’d buy a home with mold (55%), a leaky roof (59%), and foundation issues (59%). Furthermore, 2 in 3 millennials (67%) would buy a home that was a former meth lab, and nearly 3 in 4 (72%) would buy a home within a mile of a prison.
Although some buyers would reject homes that pose serious health and safety risks, others are more concerned with cosmetic faults. One-fourth of millennials (25%) wouldn’t buy an outdated home, and nearly 1 in 5 (19%) wouldn’t buy a home with wallpaper.
Interestingly, buyers would rather take their chances with asbestos than purchase a home where a murder was committed.
Millennials may be more willing to take risks because nearly 1 in 3 (29%) plan to live in their home less than five years — against the advice of financial experts, who suggest staying in a home a half decade or longer to build sufficient equity.
By contrast, only 15% of boomers plan to live in their homes less than five years as the majority aim to age in place.
1 in 4 Millennials Would Buy a Home That Exceeds the Median U.S. Price
More than one-third of millennials (39%) worry they won’t be able to find an affordable home, but others plan on spending big, regardless of the financial consequences.
Nearly 1 in 4 millennials (23%) plan on buying a home that costs more than the national median of $455,000. Of those, two-thirds (67%) are first-time buyers without previous equity to put toward their purchase.
To afford such expensive homes, 1 in 3 millennials (38%) anticipate maxing out their budget.
First-time buyers who are strapped for cash in today’s expensive market intend to rely on financial support programs to make home buying more affordable. For instance, 79% of millennials plan to apply for first-time home buyer assistance.
All generations support additional help for first-time home buyers — especially millennials. About 83% of millennials say the government should do more to help buyers afford their first home, compared to just 64% of boomers, who are less likely to be first-time buyers.
1 in 7 Millennials Would Offer $100,000 or More Over Asking Price for Their Dream Home
After two years of stratospheric costs, home prices may finally start to fall — or at least stabilize. In September 2022, the average U.S. home sold below asking price for the first time in nearly 18 months.
Some markets remain seller strongholds, but most buyers can expect a reprieve from bidding wars and intense competition that escalate home prices. In fact, just 36% of millennial home buyers are prepared to pay more than a home’s asking price, compared to 43% who said the same in 2022.
Yet for their dream home, some millennials would spare no expense. Even in tough economic times, 1 in 7 millennials (14%) would offer $100,000 or more over asking price — just a slight decline from the 1 in 6 respondents (17%) who said the same in 2022.
Millennials remain much more willing to offer over asking price than fiscally conservative boomers. The younger generation is almost 1.5x more likely than boomers to offer any amount over asking price and 14x more likely to offer $100,000 or more. Not a single boomer said they’d offer that much over asking price.
Boomers seem more inclined to press their advantage as the market pendulum swings back toward buyers. More than one-third of boomers (36%) would only offer asking price or below — making them 2.5x more likely than millennials to submit a lower offer.
80% of Millennials Have Non-Mortgage Debt
Affording a home is a challenge for millennials when a staggering debt burden makes it difficult to plan and save for the future.
Nearly half of millennial home buyers (46%) are $10,000 or more in debt, while nearly 1 in 5 (19%) owe $50,000 or more. Just 20% of millennials have no debt.
The percentage of millennials who owe at least $10,000 and are looking to buy a home in the next year actually dropped 54% from the year before — when 71% of millennial home buyers owed that much.
It’s possible that as inflation pushed home prices and interest rates higher in 2022, millennials with large amounts of debt decided to postpone their home search — especially when more than 1 in 3 millennials (37%) already worry about qualifying for a mortgage.
A mortgage application can be denied for multiple reasons, including a low down payment or poor credit, but millennials are primarily concerned with their existing debt.
In particular, they fear that:
- They have too much credit card debt (24%)
- They have too much student debt (19%)
- They have too much medical debt (17%)
Although debt among millennial respondents has decreased, the cohort still owes more than older generations. Only 28% of boomers and 36% of Gen X are $10,000 or more in debt.
With less debt, older generations are less likely to support debt forgiveness programs. Millennials (63%) are about 2x more likely than boomers (34%) to say that $10,000 in student loan forgiveness would significantly impact their home-buying experience.
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 Dec. 1-2, 2022. 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.
More Research From Real Estate Witch
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Millennials Are More Than $100,000 in Debt: Discover how this generation’s debt affects their ability to qualify for a mortgage and buy homes.
U.S. House Prices Are Rising Exponentially Faster Than Income: Homeownership has become increasingly elusive for millennials, with home prices leaping 118% since 1965. Find the most affordable metros for housing.
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Do millennials have home-buyer remorse?
Among millennial homeowners, 82% have at least one regret from their first purchase. The most common regret among millennials is that their interest rate is too high (22%). Learn more.
Are millennials waiting for the housing market to crash?
Two-thirds of millennial home buyers (75%) think the housing market is in a bubble that could burst in 2023, but experts say home prices are unlikely to plunge drastically. Learn more.
How many millennials own homes?
About three-fourths of millennials (72%) are first-time home buyers, compared to just 28% of boomers, and they've bought more homes than any other generation since 2014. Learn more.