Photo: Robert Clark
Some $514 billion was poured into the US housing market last year by Millennial homebuyers alone.
Millennials, the largest generational group of homebuyers over the last year, were more likely to go over budget to buy a house in today’s highly competitive housing market than all other homebuyers, according to the 2017 Report on Consumer Housing Trends released today by the listing site Zillow.
Over the last year, Millennial homebuyers have continued to face affordability challenges. They are more likely than other buyers to say they struggled to find an affordable home and find one on their time frame. And 37 percent of Millennial homebuyers say they went over budget, compared to 29 percent of all buyers.
“In many cities across the US, the housing market is extremely competitive, especially for first-time buyers who are looking to purchase a starter home,” says Zillow Chief Economist Dr. Svenja Gudell in the report.
The abysmally low level of starter homes nationwide has also resulted in rising home prices in the entry level market, with homebuyers often engaging in bidding wars in some hot markets. Buyers in the West and Northeast are more likely to go over their budgets due the competitiveness of the markets and limited inventories.
Millennials’ inexperience as buyers could also cause them to go over their budget, says Zillow.
Additionally, more than half of all Millennials made multiple offers to buy their first home, while only 39 percent were able to put the recommended 20 percent down. Meantime, 21 percent of Millennial homebuyers put down 5 percent or less.
Coming up with a down payment continues to be a struggle for many Millennial buyers. Nearly 30 percent of Millennial homebuyers reportedly received assistance from relatives or friends, while 31 percent fund their downpayment from “multiple sources.”
Also, more Millennial homebuyers are likely to look for a rental and a home to purchase simultaneously, “indicating they accept the fact that buying a home is not a sure thing,” says Zillow. Some 62 percent of Millennials look for rentals while in the market to buy.
With homeownership being out of reach for many Americans, renting is at an all-time national high. In fact, 40 percent of all renters are families with children, says Zillow.
But renters often face higher monthly payments compared to homeowners, according to Zillow. More than half percent of renters cited rising rent as the reason they moved in the last year, and 25 percent of renters were forced to look outside of the area they were initially began their search in order to find an affordable rental.
And 37 percent of renters who did not move in the last year say they can’t afford to move.
“Young buyers often start their careers in fast-growing cities in which the market is particularly tough – and they’re trying to save for a down payment while making record-high rent payments,” says Gudell, in the report.
But Millennials are finding surprisingly resourceful ways to deal with a fiercely competitive housing market.
“Whether it’s searching for a rental as a Plan B, looking outside their preferred neighborhood, or cobbling together a down payment from multiple sources, these buyers are willing to try every trick in the book in order to find a place to call home,” says Gudell in the report.
Click here to read the entire report.