Record amounts of student debt and steadily increasing mortgage rates have long prevented young adults from entering the housing market, but recent data may indicate that things are about to change in a major way.
A new study by Bank of America reveals that Millennials are now prioritizing homeownership above other major life milestones, including starting a family.
“This fall’s report finds that Millennials are redefining life’s priorities by placing homeownership above nearly all other key milestones, including marriage,” Bank of America Consumer Lending Managing Director Steve Boland said. “Millennials equate homeownership with personal and financial success, and it’s encouraging to see this generation aspire to homeownership.”
According to the report, 72% of Millennials consider homeownership a top priority, followed by retirement at 80%.
Notably, homeownership is also perceived as a status symbol among Millennials, with 53% equating it with personal achievement and 45% with financial success.
The report discovered that many first-time buyers carefully plan their in home purchase, considering who to buy with, where to buy and when to buy.
“While the majority plan to buy with a spouse or partner, many are venturing out on their own and say they will buy their first home solo,” Boland continued. “Regardless of who they are buying with, first-time buyers are getting ready to pull the trigger, as nearly two in five plan to buy within the next two years.”
However, the report highlights that many potential buyers are still torn between renting and buying.
“In taking a closer look at our renter group, it is clear there are inconsistencies and a knowledge gap in the 'own vs. rent' debate,” Boland said. “While contradictory, many think renting will be just as or less expensive than owning in the long-term, but they fully acknowledge their rental costs will continue to go up over time.”
The report states that 49% of renters feel like they are throwing their money away, 46% feel like they aren’t building any equity, 32% feel like they’re paying their landlords' mortgage and a whopping 52% are discouraged by increasing costs.
However, Bank of America determined that renters are slow to enter the home buying market because of down payment, credit score and private mortgage insurance concerns.
The data reveals that 49% of first-time buyers believe that a 20% down payment is required to buy a home, 43% think they need to pay private mortgage insurance if they cannot put this amount down, and 24% think they need a perfect credit score to even be considered for a mortgage.