The current level of inflation has impacted the home-buying plans of 92% of millennials, and nearly half (47%) say high interest rates are a significant barrier to homeownership, according to a new report from Clever.
Clever’s latest report asked millennials who are planning to purchase a home in the next year about their plans, anxieties, and compromises they’re willing to make.
The report found that 3 in 4 millennials (76%) think market conditions will worsen before they buy a home, with more than 1 in 4 (28%) delaying their search. In addition, two-thirds of millennials (75%) think the housing market is in a bubble that could burst in 2023, ushering in an era of greater affordability.
Key highlights:
- A majority of millennials (51%) have been reduced to tears during the home-search process.
- 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.
Major takeaway:
“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,” said Jaime Dunaway-Seale, a content writer at Clever and author of the report. “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.”
Added Dunaway-Seale, “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.”
For the full report, click here.
