There has been a lot of good news in the housing industry lately that Millennials are finally ready to settle down and buy homes. Dubbed the “Millennial Housing Movement”, many analysts expect Millennials will be the ultimate high gear that propels the next housing boom. Here's some recent coverage: Business Insider, Forbes, and Market Watch.
Millennials have always been the media and business darling not only because our nation has always been youth-obsessed. They are the largest population group at 75.4 million according to the latest Census Bureau, and one quarter of our country’s population. But here’s a well-document problem for Millennials: they tend to be saddled with college debt and are expected to earn less than their parents. This is a key reason – not their rumored fear of commitment – that Millennials have been late to get married, start a family, and to buy their first home.
From our latest ValueInsured Modern Homebuyer Survey, we learned again, as we did in all our previous quarterly surveys, that Millennials want to own homes. 83% say owning a home is an important part of their American Dream. 76% say they would want to buy a home, and 74% say they would like to buy a home now if they could afford one. Here is the big caveat – “if I could afford one”.
38% of the Millennial non-homeowners we surveyed say we don’t have the confidence they could afford a down payment on their first home; that’s half of number of Millennials who say they want to buy a home.
One good news for these would-be first-time homebuyers is that many leading financial institutions have recently developed new low-percent down payment mortgage programs, some designed specifically to benefit first-time homebuyers. Amalgamated Bank, one of ValueInsured’s partners, is one of them. According to our research, 73% of Millennials plan to put down less than the traditional 20% when they buy their first home. 4 in 10 (41%) plan to put down 10% or less, and 17% plan to invest 3% of less down payment when they buy their first home. It is good news that at least 17% of all Millennials surveyed seem to have heard of the new low down payment mortgage programs, and at our current historically low interest rates, this seems as good a time as ever to take advantage of such programs so more Millennials could fulfill their dream of homeownership sooner.
Another noteworthy insight we learned from our Fall 2016 Modern Homebuyer Survey is Millennials’ willingness to turn to other sources for their down payment. It makes sense as Millennials have always been the most information and resource savvy generation, so it is no surprise they will turn to non-traditional channels to help fund their down payment. The detailed breakdown is as follows.
% Millennials who plan to obtain at least part of their down payment for their first home purchase from the following sources:
- Personal savings and/or investments - 68%
- Loan from a bank or a financial institution - 35%
- Loan or gift from a family member - 12%
- Government or state-funded loan or grant - 7%
- Loan or gift from a friend - 4%
- Loan or gift from an employer - 2%
16% of them plan to obtain a gift or loan from family or friends; 13% plan to obtain a loan or grant from their employer or a government- or state-sponsored program. And it is particularly noteworthy for our banking and lender partners that 35% Millennial first-time homebuyers plan to borrow at least part of their down payment from a bank loan.
As housing professionals, ponder this: what could happen if the current half who thinks homeownership is out of reach is given the confidence and new innovative solutions to afford a down payment? This half is now sitting on the sidelines, waiting to find ways to buy their first home, as the industry awaits the next great American housing boom.