Millennials’ confidence to afford home lowest in 18 months

Dispelling an old urban myth, we now know Millennials want to own homes, just like most everyone else. From ValueInsured’s Modern Homebuyer Survey, we learned that 8 out of 10 Millennials today want to become homeowners, and believe owning a home is an important part of their American Dream. There are many other recent studies, for example, here, here, and here that report similar conclusion.

Affordability is by far the biggest barrier to homeownership for Millennials. Some blame their addiction to avocado toasts, some say it’s the bachelor parties. In reality, Millennials are more likely burdened by student loans and high rent, among other rising living expenses, to transition smoothly to homeownership.  This fiscally conservative generation is looking for greater value and flexibility from their dollar in everything they do - including housing.  

Through ValueInsured’s quarterly survey, we learned that even among Millennial non-homeowners who express an interest in buying a home “in the next few year”, the confidence that they could actually afford one they would like to buy continues to hover below 50%. There was a period of increased optimism that coincided with Brexit-led interest rate drops last summer, but the boost could not sustain momentum. Despite continually improving job reports, wage increase has not kept up. At the same time, home prices have increased on average 6.7% nationwide in the past 12 months - a number 58% now believe is due for a correction. So even while home mortgage rates continue to remain at historically low levels – albeit having gone up since the Brexit bottom – Millennials’ confidence to afford a home has since reversed from its peak in Summer 2016:

  • In ValueInsured’s Spring 2016 survey, only 38% of all Millennial non-homeowners who were interested in buying a home “in the next few years” expressed confidence that they could afford to buy one that they would like to own and live in.
  • Millennials’ confidence level in this measure enjoyed a notable increase, up 9 percentage points, to 47% immediately after the Brexit-led interest rates drop in the July 2016 survey. This exuberance appeared to be short-lived.
  • In subsequent quarterly surveys, Millennial non-homeowners’ confidence to afford a home they would like to buy returned back to the pre-bump level of 38% (down 9 points) in October 2016, possibly due to market uncertainties leading up to the presidential election, then up 6 points to 44% in January 2017 as the market rallied after the election.
  • However, by the Spring of 2017, as home prices continued a record-breaking trajectory in many markets, and as interest rates began to rise, Millennials’ confidence in their own ability to afford buying a home began to drop, to 40% in April and then now, to the lowest level in 18 months, at 34% in the latest July survey. In other words, only 1 in 3 Millennial non-homeowners who expressed interest in buying a home in the near future now have the confidence that their plan could materialize, due to a lack of affordability.


Lack of affordability and deflating confidence are pressing issues that plague many homebuyers, not only Millennials. As many have no choice but to extend their tenure as renters, rising rents further prevent them from saving enough to buy a home, and the cycle continues. Lack of inventory is also stressing the issue. New home builds are focused on rental units and higher-end homes; existing homeowners - while believing it is a good time to sell - are unmotivated to become buyers in a high-priced market.  Both of these leave a gap in the affordable starter home market for Millennials.

It is worth noting that during the same tracked survey period, the desire to own home has stayed consistent among Millennial interested homebuyers in ValueInsured’s surveys. There are indication from recent reports that while many of these first-time homebuyers are not yet giving up on their desire to own, many are compromising by buying smaller starter homes that have little room for future growth, “fixer-uppers” homes that require renovation, or have to commute further than they initially planned in order to afford a home in their city’s outskirts. According to NAR, more new homebuyers are exceeding their budget and seeking financial help from family in order to purchase a home.

As many Millennials stretch their dollars to buy less, more could be on the line for them as their margin of errors narrow. In addition, as existing homeowners consider selling, those that can find greater value and assurances that they are not at risk from buying high, will be more confident to sell and buy again - opening up inventory and aiding affordability.