- Millennials may be increasingly moving away from the sidelines and ready for homeownership.
Have millennials who have been slow to jump onto the housing ladder finally figured out the path to wealth their parents followed?
The latest survey from Bank of America (BofA) suggests they believe so — and that they are moving happily along their way toward being for-real, big boy (or girl) grownups.
Indeed, the survey by GfK Public Communications and Social Science on behalf of BofA’s consumer lending group found that 39 percent of the 18-to-34 year-old owners queried associated ownership with adulthood. That’s the largest share of any generation to feel that way.
On the other hand, just 16 percent think of owning a home as achieving the American dream and only 11 percent equate it with permanence. In both cases, they are the least likely generation to define owning a home in that fashion.
Jumping in from the sidelines
It found that millennial owners are least likely to define ownership as permanent. Here, the breakdown was 11 percent for Gen Yers, 23 percent for GenXers, 29 percent for baby boomers and 37 percent for seniors.
It also found that four out of five millennial owners said that buying their initial home has had a positive impact on their long-term financial pictures. And 68 percent said they bought now and intend to use their today-house as a “stepping stone” to their forever home. In comparison, only 36 percent of owners across all age cohorts feel that way.
“After years of seeing millennials sit on the sidelines,” said D. Steve Boland, the consumer lending executive at BofA, “it is clear some are recognizing it might not make sense to wait.”
In Boland’s view, these young first-time buyers are “excited to get started” and “understand the benefits (ownership) can have on their long-term financial picture.”
The poll also found that 86 percent of these Generation Y owners — nearly nine out of every 10 — say that owning is more affordable than renting. In sharp contrast, 45 percent of those who have yet to buy a house maintain than renting is the less-expensive option.
More than a money game
But its not all about finances, owners told pollsters. Just a third said their home’s value is determined by how much it cost. On the other hand, a whopping 95 percent said they are proud to be called homeowners, and 91 percent said they treasure the memories they have made.
Just 21 percent say ownership has been a burden.
Also, 82 percent said they look for ways to make their homes more valuable. And 70 percent spend much of their time working on their homes. Perhaps that’s the financial, care and upkeep burden they are thinking of?
Meanwhile, Gen Yers who haven’t taken that first step yet say ownership is in their crosshairs. One in four say they will buy within two years, and 35 percent have already started to collect their down payments.
Down payment and debt
Unfortunately, too many — almost half — still cling to the mistaken belief they are going to need 20 percent down to move forward. But in better news, 41 percent think just 10 percent or less is necessary for a down payment.
“Some prospective first-timers tend to believe their personal circumstances should line up perfectly, yet there are many ways they can achieve responsible and sustainable ownership much sooner than they think,” said Boland.
Most of the first-time buyers of all ages — 75 percent — expect to use their savings for the down payment, while 78 percent of older millennials ages 25-34 will do the same. A small minority are looking for a financial windfall such as an inheritance or a gift from a loved one.
Perhaps surprisingly, potential first-time buyers are split almost evenly on whether they would qualify for down payment assistance. But nearly nine out of ten — 87 percent — would take advantage of a program or two if they did qualify.
To get ready for that big first step, the survey found that these future buyers are juggling their financial priorities.
Some 61 percent are paying off their debts, 47 percent are working to improve their all-important credit scores and 32 percent are paying off their student loans.
In that same vein, owners across all generations said they would tell their younger selves to start saving sooner (60 percent), plug maintenance costs and unexpected expenses into their budgets (42 percent) and create and stick to a budget (35 percent).
Bank of America’s second annual “Homebuyer Insights Report” is based on an online poll of 4,906 adults taken in late January.
Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.