Most millennials have homeownership on their bucket lists, but many are choosing less expensive and smaller homes to make that happen, a new survey suggests.
Clever Real Estate, an online platform that matches consumers with real estate agents, surveyed 1,000 people who have plans to buy a house within the next 12 months. The study found that millennials — classified as those between the ages of 19 and 35 — face a number of challenges when it comes to homeownership, but are finding ways around them.
Most millennial homebuyers said they consider homeownership to be part of the American Dream, yet the percentage that believe that to be true has dropped from 84% in 2019 to 70% in 2020. One reason that fewer millennials may be setting their sights on homeownership could be the number of financial obstacles that make affording a house more difficult:
- Over 25% of millennials planning to buy a house this year have less than $1,000 in savings
- 44% of millenial respondents have outstanding debt, with 23% owing more than $10,000
In fact, millennial survey respondents ranked saving for a down payment as the biggest barrier to homeownership (48%), followed by homes being too expensive (41%), the cost of living being too high (36%) and potential homebuyers finding themselves in too much debt (31%).
Overcoming barriers to homeownership
Despite the challenges, many millennials are finding ways to make their dreams of homeownership a reality.
For one thing, millennials are exploring less expensive and smaller houses. According to the survey, 24% of millennial homebuyers are looking to spend less than $100,000 on a new home, up from about 19% considering spending that amount in 2019. Additionally, a lower percentage of millennials want to spend between $100,000 and $499,999 on a house in 2020 compared to in 2019.
When it comes to the size of the home they’re looking for, millennials, on average, are looking for homes that are about 1,694 square feet. In comparison, Gen Xers — those between the ages of 36 and 55 — want houses that are about 1,924 square feet, and Baby Boomers — those who are 56 and older — want houses that are about 1,915 square feet.
Many millennials are also exploring low down payment financing options. In fact, 70% of millennial survey respondents said they were planning to put down less than 20% on a new house, while 27% said they would put down less than 10%.
Other ways millennials plan to achieve their dream of homeownership include:
- Getting money from family members (27%)
- Leasing a rent-to-own property (34%)
- Taking a mortgage loan with an interest rate of 6% or higher (40%)
If buying a house is on your to-do list this year, take the time to explore the many resources available that can help you achieve your goal. Not only do you want to figure out how much of a down payment you will need, but you also may want to explore the various first-time homebuyer programs that lenders are offering.