Lew Sichelman is a seasoned writer with 50 years of covering the housing and mortgage markets under his belt. His biweekly Inman column publishes on Tuesdays.
The desire to own a home is pushing some millennials into taking steps they come to regret after the dust has cleared and they have settled into their new digs, according to a recent survey of some 600 young adults ages 21 to 34 by the Bank of the West.
“Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face,” Ryan Bailey, head of the bank’s Retail Banking Group, said in a statement.
What do they regret?
Among what they perceive as mistakes: Dipping into their retirement savings, feeling stuck in one place and being saddled with monthly mortgage payments that leave them stretched too thin.
Overall, two-thirds of the respondents said they are afflicted with a common malaise among all homebuyers called “buyer’s remorse,” wishing they had been more prepared going into the purchase. The only known cure is time, which poet Geoffrey Chaucer said heals all wounds.
Millennials may be rushing into a home-buying decision without asking all the right questions, the survey indicated. For example, 44 percent of those queried had issues with the house itself.
This age cohort tends to pride itself on the ability to pull up stakes and head elsewhere whenever its members desire. But the survey also found that as homeowners, moving around is no longer so easy.
Furthermore, they didn’t see some damage that was present until after they moved in. They also didn’t discover that the space didn’t work for their family until it was too late.
How to avoid buyer’s remorse
“A white picket fence can certainly be a smart investment,” said Bailey, who is no relation to George Bailey, a long-deceased banker in mystical Bedford Falls, New York. But “to avoid buyer’s remorse, millennials should cover their bases and kick the proverbial tires … before they sign on the dotted line,” Bailey said.
Agents can also help by addressing the issues that cause buyer’s remorse during the first meeting. Do your millennial clients know what to expect? Are they really ready to own? Do they understand the long-term costs associated with owning a home?
These are things agents should review with buyers in a casual yet informative conversation. You are the expert — share your expertise with your clients.
Is getting into debt worth it?
Especially “alarming,” the Bank of the West executive said, is that one in three millennials has taken money from their IRA and 401(k) to make or add to his or her down payment. Although home ownership is an admirable goal, taking money out of a retirement account early is generally frowned upon by financial planning experts.
Somewhat surprising, while most millennials eschew debt, they seem completely at ease with taking out a big loan to buy a house.
Indeed, 69 percent believe they only have it made when they are debt-free, and 58 percent pay off their credit cards in full every month. Yet, for 56 percent of the respondents, owning a home takes precedence over paying off debt or retiring comfortably. And an unspecified number understand that they need to take on a mortgage and are comfortable with this kind of “rite of passage” debt.
Overall, the survey found that 57 percent of all millennials believe in home ownership, and 54 percent believe it is attainable today. Actually, owning the roof over their head is the top goal of the majority of this cohort, more so than getting married and having children.
On the flip side, though, 23 percent said they no longer believe in ownership, and 13 percent said they never did.
Besides discovering unknown damage and realizing the house doesn’t work as well as they first thought, millennials also tend to regret not putting up more money at closing to ease the monthly mortgage pinch and finding out after the fact just how costly it is to maintain a house vs. calling on a landlord to fix something that breaks down.
Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.