This article is from the Florida Association of Realtors.
Most Millennials plan to buy first home in next five years
More than four in five (80 percent) Millennials in the United States who don’t own a home intend to buy in the next five years, according to recent HSBC Group research.
HSBC Group’s Beyond the Bricks — an independent consumer research survey of 9,000 people in nine countries worldwide including 1,009 respondents in the U.S. — found that homeownership is a dream deferred but not dead for many Millennials around the world who name slow wage growth and housing price inflation as the greatest barriers to purchasing a home.
The report also reveals the need for better financial planning as another significant hurdle for Millennials.
According to David Gates, U.S. head of mortgage origination and sales for HSBC: “This study highlights that young people strongly value homeownership, yet there are significant challenges to making the dream a reality for Millennials around the world. The perfect storm of stagnating salaries and rising house prices, paired with the need for improved financial planning can make buying a home a deferred reality.”
Nearly three-quarters (71 percent) of Millennials are saving more money for a deposit and waiting to earn a higher salary before buying a property, the report finds.
Millennials face significant challenges when it comes to housing affordability. With an expected 1.9 percent increase in salary growth expected in 2017 and average property prices climbing by 4.8 percent last year, the dream of owning a home remains a challenge for many.
Of the 71 percent of Millennials who seek to both save and earn more money, 49 percent feel they are being held back because they cannot afford to buy the type of property that they would like.
More than half (57 percent) of Millennials who bought a home in the last two years ended up spending beyond their initial budget.
The report also finds that many Millennials do not have their house in order when it comes to financial planning for a home purchase. Among non-owners intending to buy a home in the next two years, nearly one in three (32 percent) have no overall budget in mind and a further 54 percent have only set an approximate budget. As a result, 57 percent of Millennials who bought a home in the last two years ended up overspending their budget.
On the other hand, the millennial generation is willing to consider making big sacrifices to afford a home. Among non-owners intending to buy, 55 percent would consider spending less on leisure and going out, 41 percent would consider buying a smaller than ideal place, and 27 percent would even be prepared to delay having children.
Financial support from parents can make a big difference when saving for a home, and 28 percent of Millennials who bought their own home turned to the “bank of Mom and Dad” as a source of funding.
HSBC research identifies four actions that Millennials can take to help make their homeownership dream a reality:
• Plan early and don’t underestimate the deposit.
• Budget beyond the purchase price to account for extra costs other than the home purchase.
• Consider what sacrifices you can make to save more and faster.
• Get a full view of your finances and find a home loan that suits your needs.
Millennials are defined as those born between 1981 and 1998. The findings are based on a survey of homeowners and non-owners aged 18 or older from a nationally representative online sample in eight countries and a nationally representative face-to-face sample in the UAE. The research was conducted by Kantar TNS in October and November 2016. ¦