Homeownership is supposed to be one of the great “adult” milestones: car, full-time job, marriage, home, family. And among baby boomers and Generation X, this has largely been true, but millennials are not experiencing the same satisfaction and pride previous generations have found when purchasing a home. According to a recent report from St. Louis, Mo.-based Clever Real Estate, homeownership is stressing millennials out, a lot.
In a survey of 1,000 U.S. homeowners, millennials were twice as likely to be anxious about homeownership compared to boomers (only 13 percent of whom reported owning a home as a stressor). Moreover, nearly 50 percent of millennials felt at least some buyer’s remorse after purchasing a home (compared to 20 percent of boomers), and America’s largest generation is also three times as likely to express general anxiety about the idea of owning a home.
Why? According to Clever’s report, there are three key factors adding stress to the homeownership experience for millennials:
- Millennials are putting less down and paying more in principal interest, taxes and insurance each month.
- They are buying fixer-uppers that require huge renovations.
- Millennials are using high-interest loans and credit cards to finance these renovation projects.
And keep in mind this is a generation that is struggling with student loan debt and financial instability on a greater scale than previous generations.
“Most millennials are new to homeownership (61 percent of millennials surveyed have lived in their homes for less than five years), and I think there’s a learning curve to homeownership,” said Thomas O’Shaughnessy, report author and research analyst at Clever.
Not only are two-thirds of millennials putting down less than 20 percent on their mortgages (23 percent of boomers are putting down 20-29 percent, and 19 percent are putting down 50 percent or more), resulting in high mortgage premiums, most are paying private mortgage insurance each month until they’ve earned 20 percent in equity.
Add to this the fact that many millennials are purchasing homes that need repairs and maintenance, and you’ve got the beginnings of a long cycle of debt.
“Often homeowners will get into a project, and then something goes wrong,” said O’Shaughnessy. “Maybe you need to buy a new tool or the contractor finds something behind your drywall. I can tell you as a homeowner myself, we end up taking way more trips to Home Depot than we plan! Older homeowners have more experience and are used to problems arising.”
O’Shaughnessy believes lenders should be upfront about the costs of homeownership and how the state of millennials’ finances may be impacted by a home purchase. “The home buying process is complicated, but by showing borrowers what they’ll pay in property tax, insurance and expected maintenance, banks can ensure their borrowers know what they’re getting in to,” he said. “Helping them find information on local utilities (e.g., sewer, water, gas, trash, etc.) can also help. It really protects both parties in the long run because banks don’t want to lend out to buyers who can’t pay their mortgages.”