Millennial first-time homebuyers lag in financial prepping
A significant number of millennials planning to purchase their first home during 2020 have not yet taken the financial steps necessary to successfully complete the process, a TD Bank survey found.
Just over half of the 850 people between 23 and 38 surveyed, 52%, started saving for a down payment although they intend to purchase home this year. A similar number, 53%, have reviewed their credit report.
Yet, approximately half of the respondents, 52%, said they were already searching home listings online. And 42% of millennials surveyed already created a budget for their home purchase.
A TD Bank survey from last March found many millennials lack understanding about their personal credit habits.
When it comes to the mortgage process, 52% said they would prefer to start their application with a lender in person, while 34% would do so online. This is in line with the 2019 J.D. Power mortgage originator survey that showed recent homebuyers preferred some form of personal contact during the loan process.
However, in preparation for buying a home, only 30% have spoken with a mortgage lender.
Their parents are an alternative source for home buying information for 37% of the respondents. Nearly half, 49%, said their parents are chipping in through contributing to the down payment, closing costs, monthly payments or co-signing the loan.
Moreover, 85% of buyers whose families lost their home during the housing crisis said they will receive financial help from their parents. More than half of the respondents, 55%, said their family or a family they knew lost their home during the crisis.
Over two-thirds of those surveyed, 68%, said now is a good time to purchase a home. A recent Fannie Mae survey found 59% of all consumers said December was a good time to buy a home.
Yet rising home prices negatively influence millennials' opinion of the market. Steep prices in their desired neighborhood have kept 22% from purchasing a home to date; 17% of potential buyers said they have yet to act because they enjoy renting in their current neighborhood but can't afford to buy there. About 36% of respondents stated homes are currently overpriced.
The survey also found millennials' current living situations shape their perceptions of entering the housing market: 78% are renters, while another 19% live with their parents.
Approximately seven in 10 respondents said their expectations for their first home are higher because of the amenities of where they currently live, with 84% saying they would delay the purchase of a home until they found the ideal place.
Slightly less than half of those surveyed, 47%, said growing up during the housing crisis made them nervous to purchase a home, while 70% called the housing market fragile.
Stability of employment drives the home purchase market as well; 51% of the respondents said they were concerned about their job stability. Meanwhile, 35% said they were worried about the stability of their relationship with their romantic partner when thinking about the home buying process.
When it came to external factors, 57% expressed worry about the state of the economy, while 47% cited potential housing policy changes due to the 2020 elections.
"The millennial cohort of homebuyers is unlike any other in history," Rick Bechtel, head of U.S. residential lending at TD Bank, said in a press release. "They grew up during the explosion of personal technology, the fall of the housing market and the renaissance of the rental market. And as our survey found, their expectations of homeownership are shaped by all of it."