While Millennial homeownership is on the rise, a whopping 42% of that elusive group has yet to buy a home.
That is just one of the astonishing findings from a recent LendEDU survey that sought to identify what the hesitation is in 23-38-year-olds when it comes to buying a house.
In filtering out some of the reasons, like “Have memories from the 08-09 financial crisis led you to not want to become a homeowner?” (67% said “No”) or “Is overwhelming student loan debt preventing you from already being a homeowner?” (Only 10% of the respondents said “Yes”), one thing was clear: the desire for homeownership was certainly there.
In fact, 89% of the respondents said, “Yes” to wanting to become a homeowner at some point in their lives.
So, what is the issue then? The desire is there, there is not a lingering fear of another mortgage crisis, and most Millennials aren’t so overwhelmed with debt that they can’t see the value in homeownership.
The data instead indicates that the issue doesn’t necessarily lie in their personal financial situations, although some noted that a lack of a savings does play a role, but rather it is their lack of mortgage knowledge.
In response to the question, “Do you believe that a lack of knowledge when it comes to homeownership and mortgages has prevented you from already owning a home or taking longer than expected to become a homeowner?,” 55% answered “Yes.”
This is made even more clear as the study shows only 10% of Millennials had ever even applied for a mortgage before – leaving 88% that likely had never met with a mortgage professional. (2% answered “I’d rather not say”)
However, this group did understand that a mortgage would be necessary to finance a home – 75% responded “Yes” when asked if they anticipated using a mortgage to finance the purchase of their home.
Our team here at Amerifirst understands just how important it is for buyers to understand their options, because these numbers just reinforce what we see every day. There are certain perceptions of mortgage lending that are simply untrue, and without proper education, those perceptions could prevent someone from realizing their financial potential or understanding the scope of their options. If we can help your potential clients overcome these perceived roadblocks, you (the agent) can help them achieve home ownership.
In our video series, Breaking Myths, we address some of these perceptions and invite buyers to watch online or come in to learn more. Down payments, for example, have always been a topic of discussion and hesitation. Some think that you need 20% down to buy a home, which we know is not always the case. Others may have completely different numbers that they think are needed as down payments.
In that same LendEDU survey, the average of the millennial respondents was “37%” when asked, “What is generally the minimum down payment required to purchase a home?” 37%! Imagine being a 25-year-old thinking you need $37,000 down on a $100,000 home. You likely would be scared off as well. But if you were told you only needed 10%, 5%, 3.5%, or even 0% down, your tune would change.
A more technical question was posed to this group as well in reference to down payments. When asked “True or False: If you fail to put 20% down to purchase a home, you must pay private mortgage insurance (PMI)?” 40% of the respondents answered “False,” which is incorrect. Yet another area that may negatively affect someone’s views on mortgages and homeownership.
For Realtors® this study confirms just how important it is for you to be promoting mortgage education to your clients. The earlier they do so, the better. Imagine the untapped bevy of potential homebuyers that could be one educational session away from having the knowledge to move forward. That’s where we can help.
Pre-approval strategy meetings are an area that our team specializes in, and they work to address many of the issues that we see in this survey. Our goal is to educate the potential buyer before they even start looking for a home, so that by the time they are done, they are more confident and better understand the mortgage process as a whole. We also hold home buyer seminars that can teach many potential buyers at once and get them the keys to understand how mortgages work.
*Down payment, rates and terms shown are for informational purposes only and are not intended as an advertisement or commitment to lend. Not intended as accounting or investment advice. Contact your tax preparer for more information. Not all borrowers will qualify.
“Why Aren’t Millennials Becoming Homeowners?” LendEDU, 19 Aug. 2019, https://lendedu.com/blog/why-millennials-arent-becoming-homeowners-survey/.