TD Bank survey shows that many new buyers are unprepared
More than two thirds of millennial first-time homebuyers believe that now is a good time to buy a home but 75% say they are overwhelmed by the process.
A new survey of 18-23 year olds who intend to buy in 2020 also found that more than half of respondents are already searching for their first home.
Unfortunately, this keen attitude to buying is not replicated in their preparedness for the financing of their home. The TD Bank survey reveals that only 52% have started saving for a down payment and only 53% have reviewed their credit report.
Just 42% of potential buyers have worked out their homebuying budget and only 30% have spoken with a mortgage lender, although 52% say they prefer to start their mortgage application in person with a lender rather than use online channels (34%).
"It continues to amaze me how many buyers begin their home search without first speaking with a mortgage lender," said Rick Bechtel, Head of US 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."
Affordability road block
While respondents are keen to buy, they feel challenged by affordability.
One in five said that they hadn’t bought yet due to the high prices in their chosen neighborhood and a third of those respondents thought homes were overpriced. For 17%, they like living in their current neighborhood but can’t afford to buy there.
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%).
Housing crisis fears
Most respondents, although young at the time, are aware of the last housing crisis and its impact.
They want to ensure that their personal finances and job security as well as the economy are stable before they commit to homebuying.
This group of potential homebuyers are also tapping their parents’ insights about the housing market – and receiving their help with homebuying finances including down payment and monthly mortgage payment contributions.
"The millennial cohort of homebuyers is unlike any other in history," said 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."
