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Interest rates are poised to fall in 2024 — a piece of much-needed news for the millions of would-be buyers and sellers who’ve been locked out of the market after an extraordinary rise in rates from 2022 to 2023.
However, if burgeoning economic tailwinds twist another way, a new Clever Real Estate survey, published Tuesday, revealed millennial buyers are ready to weather the storm rather than continue to wait.
“More than 3 in 4 millennial homebuyers (78 percent) would consider accepting an interest rate that’s higher than the national rate of about 7 percent,” the survey read. “What’s more, 65 percent would accept an interest rate of 10 percent or more, while 23 percent would accept a rate of 15 percent or more.”
Millennial homebuyers aren’t willing to stop with higher interest rates — of the 1,000 survey respondents, 80 percent said they’d pay above asking price, 85 percent would purchase a home sight-unseen, 27 percent would live near an airport and more than 60 percent would purchase a fixer-upper with asbestos (67 percent), mold (62 percent) or termite issues (62 percent).
“A majority of millennials desperately want homes,” the survey read. “Seventy-eight percent [of respondents] said a home purchase is still part of the American dream.”
While homebuyers said they’d be willing to they’d take extreme measures to become a homeowner, such as forking over an additional six figures over the asking price (11 percent) or purchasing a home sight-unseen simply because of a potential bump in interest rates (21 percent), respondents’ financial realities revealed another picture.
Fifty percent of respondents said high interest rates were the biggest barrier to homeownership, followed by expensive home prices (46 percent), down payment requirements (42 percent), competition from other buyers (39 percent) and qualifying for a mortgage (36 percent).
Nearly 60 percent of millennial buyers said they want to purchase a home for less than $400,000; a tall order when the current U.S. median home price is $431,000. To be truly competitive, millennial buyers said they’d get another job (32 percent), move to a rural area (21 percent), rent a room in their future home (17 percent), skip other debt payments (16 percent), or create a GoFundMe (15 percent) to afford housing costs.
When it comes to a down payment, the percentage of homebuyers who said they plan to offer 20 percent or more jumped from 39 percent in 2023 to 53 percent in 2024 — a 35 percent year-over-year change. However, these buyers will need major help to meet their down payment goals.
Twenty-five percent of millennials have less than $10,000 in savings, 12 percent have less than $1,000 and 5 percent have nothing saved at all. To get their savings up, millennials said they’re cutting back on spending (36 percent), taking on extra jobs (36 percent), moving in with family (23 percent), taking money from retirement funds (17 percent) or receiving gifts from family and friends (14 percent).
Although millennial homebuyers believe the laundry list of concessions they’re willing to make is worth it, the responses from millennial homeowners’ revealed deep regrets over the decisions made amid the previous housing frenzy.
Of the 33 percent of respondents who own a home, 90 percent have regrets about their purchase. Nearly 30 percent said they chose a bad location (27 percent), have bad neighbors (26 percent), have an unfavorable interest rate (25 percent), have an expensive mortgage (22 percent), or have outgrown their home faster than they expected (20 percent).
Millennial homeowners also said they were unprepared for the “hidden costs of homeownership,” which include unexpected or higher-than-expected taxes, insurance, maintenance and repair costs.
An October Inman Intel feature revealed the typical first-time homebuyer could spend $130,000 during their first year of homeownership, with roughly $30,000 going to expenses outside of their down payment, closing costs and monthly mortgage.
