Welcome to the Real World. Millennials Wake Up to Homeownership
The big driver of home sales recently has been driven by the migration from urban centers to suburban/exurban areas that provided more space and separation for social distancing and working from home. It has also been specifically driven by Millennials, which until recently were thought to be lifetime renters. Almost as if someone flipped a switch – or Covid – all of a sudden they all want to buy a house with a yard and a fence and extra space for at-home working.
The increase in demand combined with years of underbuilding in the single family home space has caused inventory levels to drop to all-time lows and prices to rise at a record pace. With mortgage rates low, homebuyers have been able to afford more house than they otherwise could just a few years ago.
But now that they own their own home that does not come with a valet, a doorman, building maintenance, and all of the amenities that come with condo and apartment building, many millennials are realizing what some of us have known all along.
In a survey by Quill Intelligence, recent homebuyers revealed some of the reasons they feel buyers remorse. Not surprisingly, expensive maintenance was mentioned by over 20% of recent millennial homebuyers. Apparently they didn’t think about landscaping and lawn maintenance, cleaning, pest services, pool chemicals, cleaning and maintaining the grill, and all of the other expenses that are borne specifically by a homeowner instead of spread across all residents in a condo.
The other reason that jumped out was that they didn’t think buying a house was a good investment. Not when you compare returns to those of bitcoin and meme stocks. I mean, is that the benchmark? Because if it is, there will be a whole lot more disappointment when price increases start stabilizing. You’re not going to make 1000% return on your investment in a few months by buying a house.
Lastly, more than 10% of millennials also felt like they overpaid for their homes. This remains to be seen especially since prices continue to rise. But what did they expect when 80 million of them suddenly start looking for single family homes?
The other two reasons highlighted in the chart below also make me chuckle:
Mortgage too high? That happens when you overpay and you don’t have a big enough down payment to bring down the mortgage balance. Unhappy with mortgage rate? Really, it might be a bit higher today than it was a few months ago but rates are hovering near all-time lows. You think today’s rates are too high? Go ask your parents what they paid on their mortgage when they bought their first home!
To all you millennials I say, welcome to the real world kiddos….now head over to Lowes and buy yourself a lawnmower.