Millennial renters want to own home now, but need more confidence

It was a cultural myth that had traction for a while: Millennials are cynical, commitment-phobic “kidults” who reject the grown-up responsibility of homeownership and the American Dream. But recently, that myth has lost steam in the media. According to ValueInsured’s Modern Homebuyer Survey, which is conducted quarterly, many Millennial renters are eager to become homeowners.

In its most recent June survey, ValueInsured found most Millennial renters want to buy a home, but are held back:

  • 73% Millennial non-homeowners believe buying a home is more financially beneficial than renting
  • 82% say they would like to buy a home
  • 78% say owning a home is an important part of their American Dream
  • 76% want to buy a home now if they could afford one
  • 68% say buying a home is one of the best financial investments they can make
  • 53% are not confident they can afford the down payment to buy a home
  • 60% are not confident the housing crisis of 2008 will not happen again in their lifetime
  • 62% say a possible job change or job loss makes them worry about buying a home
  • 67% would buy a home sooner if they could be more confident in the housing market
  • 68% would buy sooner if they could be confidence they would not lose their down payment if the market goes down

Consumer feedback points to three key barriers that sideline Millennials from homeownership: the affordability of a down payment, confidence in the stability of the housing market, and the need for flexibility and mobility.

To help make down payment more affordable, some of the nation’s major banks – including Wells Fargo and Bank of America – have recently introduced new home mortgage programs with down payment as low as 3% without requiring borrowers to obtain mortgage insurance. ValueInsured research show 64% first-time buyers plan to invest less than 20% down payment on their next home purchase, and nearly 1 in 4 (24%) plan to take advantage of the 3% down programs. This could be good news in terms of breaking down the affordability barrier.

While a 3% or 10% down payment might make home buying more assessable to Millennials, it is still a lot of money to lose in a housing downturn for any homeowner. No one has a crystal ball; it is difficult if not impossible for new homebuyers to predict when the housing market may take a temporary dip, a price correction, or when a job move requires them to sell their home earlier than planned. When 6 out of 10 Millennial renters worry about another housing crisis or are staying on the sideline in case of a job loss, it appears that low down payment mortgage programs are only half the solution for converting renters to buyers. As banks and the housing industry help homebuyers afford their down payment, it is essential they also help protect them from losing it.