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Debt, Inflation Keeping Millennials Out of Purchase Market

Debt and inflation are unrelenting barriers to the dream of homeownership for millennials, according to a new survey from Real Estate Witch. Clever polled 1,000 millennials looking to buy a home in the next year and found that more than 9 in 10 (92%) say inflation has impacted their homebuying plans, with more than 1 in 4 (28%) delaying their home search due to it.

The real estate market has clearly changed in the past year. Just 29% of millennials now say buyer competition is an obstacle, compared to 59% in 2022. Now, nearly half (47%) ranked high interest rates as their primary concern.

Highlights:

  • A majority of millennials (51%) have been reduced to tears during the home-search process.
  • An estimated 3 in 4 millennials (76%) think market conditions will worsen before they buy a home.
  • Nearly half of millennials (47%) say high interest rates are a significant barrier to homeownership.
  • Buyer competition is no longer seen as a barrier to homeownership, indicating a changing market. Just 28% of millennials say it’s an obstacle, compared to 59% in 2022.
  • Some 82% of millennials who own a home have regrets about their purchase.
  • The most common regret among millennial homeowners is that their interest rate is too high (22%).
  • Almost two-thirds of millennials (62%) plan to put down less than 20% on a home. Only 34% of millennials did the same in 2022, when they faced stiff competition with other buyers.
  • More than half of millennials (54%) have less than $10,000 in savings — a percentage that has tripled since 2022, when only 18% of millennials had that little.
  • About 1 in 5 millennials (20%) have $0 in savings.
  • The percentage of millennials who would buy a home sight unseen dropped slightly from 90% in 2022 to 86% in 2023.
  • About 65% of millennials would buy a fixer-upper — a sharp decrease from the 82% who said the same in 2022.
  • About 1 in 6 millennial homeowners (16%) who bought a fixer-upper regret it.
  • Nearly 1 in 4 millennials (23%) plan to buy a home that costs more than the national median of $455,000, but to afford such expensive homes, 1 in 3 (38%) anticipate having to max out their budget.
  • For their dream home, 1 in 7 millennials (14%) would offer $100,000 or more over asking price, a slight decrease from the 1 in 6 respondents (17%) who said the same in 2022.
  • Debt remains a looming barrier to homeownership among millennials, with nearly half (46%) owing $10,000 or more.

An estimated 62% of millennial homebuyers say they plan to put down less than 20% on a home. Only 34% of millennials did the same in 2022, further showing a significant shift in the market.

It's no surprise millennials can no longer afford heftier down payments — more than half (54%) have less than $10,000 in savings, a percentage that has tripled since 2022, when only 18% of millennials had that little. 20% have no savings at all.

More than half of millennials (53%) say they can't currently afford a home, with most (41%) citing not having money for the down payment as the primary reason. 1 in 3 (37%) worry that they may not even qualify for a mortgage. Some 3 in 4 millennials (71%) say home buying has caused them stress, and 44% say it has negatively impacted their personal relationships. A majority of millennials (51%) have even been reduced to tears during the home-search process.

Of millennials who already own a home, 82% have regrets about their purchase. The most common regret among millennial homeowners is that their interest rate is too high (22%). Millennials still in the market for a home are not overly optimistic — 3 in 4 (76%) think market conditions will worsen before they buy a home.

Despite 77% of millennials believing buying a home is still part of the American Dream, more than 1 in 3 (37%) don't think it's attainable for the average American.

To read the full report, including more data, charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years' writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News, the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is a jazz aesthete and loves to read. She can be reached at [email protected]
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