According to TD Bank’s “First-Time Homebuyer Pulse,” 75% of potential first-time buyers say they are overwhelmed by the process of purchasing a house, but two-thirds (68%) believe it is a good time to buy a home, and 52% are already actively searching home listings online.
TD Bank surveyed more than 850 millennials (age 23-38) planning to buy their first home in 2020 to uncover their feelings around the purchase process, the greatest influences on their home buying plans, and how their perceptions and behaviors are shaped by what they’ve observed in the housing market of the past and present.
Despite an intent to purchase in the next 12 months, many buyers have not taken steps to prepare financially. Just half (52%) said they have started saving for a down payment, and 53% have reviewed their credit report.
What’s more, 42% said they have established a budget for their home purchase, but only 30% have spoken with a mortgage lender.
“It continues to amaze me how many buyers begin their home search without first speaking with a mortgage lender,” says Rick Bechtel, head of U.S. residential lending at TD Bank. “A knowledgeable loan officer will work hand-in-hand with a buyer to help them understand mortgage and homeownership costs and establish a realistic budget. To put the cart before the horse is to pursue a significant life decision with possibly incomplete or inaccurate information.”
When homebuyers are ready to start the financing process, 52% say they would prefer to start their mortgage application in person with a lender, while 34% prefer the online channel.
Although millennial buyers believe it’s a good time to buy, many feel priced out of the market. One in five (22%) said steep home prices in the neighborhood where they want to live has prevented them from purchasing a home to date, and a third (36%) of those respondents thought homes were overpriced. Furthermore, 17% of buyers said they have yet to buy a home because they enjoy renting in their current neighborhood but can’t afford to buy there.
Buyers’ perceptions of the housing market are also shaped by their current living situations – whether at home with their parents (19%) or in rentals (78%). As many as 70% of buyers agreed their expectations for their first home are higher because of the amenities they have where they currently live, and a majority would prefer to delay the purchase of a home until they find the ideal place (84%).
Despite their relatively young age at the time of the housing crisis, many millennial buyers are acutely aware of its impact; 67% of respondents are familiar with the housing crisis, and among that group more than half (55%) said their family or a family they knew lost their home. Further, 47% said growing up during the crisis has made them more nervous to purchase a home, and 70% said they view the housing market as fragile.
As such, many millennial buyers indicated stability in their personal and professional lives is a prerequisite to buying a home. Buyers said they are worried about their job stability (51%) and the stability of their relationship with their significant other (35%) when thinking about the home-buying process. Looking outward, top worries included the state of the economy (57%) and potential changes in policies due to the 2020 election (47%).
“The millennial cohort of homebuyers is unlike any other in history,” says Bechtel. “They grew up during the explosion of personal technology, the fall of the housing market and the renaissance of the rental market. And as our survey found, their expectations of homeownership are shaped by all of it.”