Millennials Willing to Compromise On Size to Own a Home

Millennials are getting a lot of attention in the real estate world these days as the up-and-coming generation of home buyers. Clever Real Estate offers this interesting breakdown of a survey from their blog.  They interviewed 1,000 people who intend to buy a  home in 2020, and calculated their answers by generation—baby boomers, Generation X, and millennials. 

Here are some interesting statistics the survey revealed:

Saving Money is the Biggest Hurdle

For nearly half of the millennials surveyed, saving for a down payment was their biggest obstacle to buying a home, and most (70 percent) don’t plan on a 20 percent down payment.

Millennials Aren’t So Concerned About Location

Millennials don’t care as much about “location, location, location”— they’re willing to overlook a nearby highway or waste management facility.

Millennials Want a Home Before Having a Family

More than a third listed their top reason for wanting to buy a home as wanting or having a family, and 40 percent said they would put these plans on hold in order to buy a home first. Birth rates among millennials definitely reflect that they’re not having kids yet:

This chart shows the U.S. Birth Rate per 1,000 people from 2000-2020
Courtesy of Macrotrends.net

Millennials Find Smaller Homes More Attainable

Of special interest to us here at Attainable Home was the finding that millennials are willing to settle for less expensive, smaller homes in order to achieve home ownership.

This chart compares how many square feet potential homebuyers want by generation.
Courtesy of Clever Real Estate

Millennials Lack Financial Literacy

And while Clever Real Estate seemed surprised to report that millennials are willing to settle for a higher interest rate than other generations, they also pointed out that more than half of millennials surveyed didn’t know what interest was.  In fact, millennials answered fewer than half of questions correctly in a financial literacy survey.  So 4 percent interest, 6 percent interest—it doesn’t sound like a huge difference, does it? And neither one even sounds like a very big number. 

But the difference amounts to nearly a hundred thousand dollars over the life of a 30-year mortgage, a difference that could really hurt the long-term financial success of the home buyers in question.

Here’s a $200,000, 30-year loan at 4 percent:

Screenshot of loan calculator for a $200,000, 30-year mortgage at 4 percent.

And here’s the same loan at 6 percent:

Screenshot of Loan Calculator for a $200,000, 30-year mortgagae at 6 percent
Find the loan calculator here.

The nearly $250 difference in monthly payments jumps out first, but make sure to compare the lines that say “This loan will really cost you…”

You Should Really See the Whole Report

Go read the whole report for a ton of other interesting stats and conclusions—there’s too much to repeat in a quick summary like this one! 

If you are one of the millennials wanting to buy a home, here’s the big takeaway: Get educated, and get saving.  You don’t have to become a CPA to understand savings, loans and interest rates. A quiet Saturday morning with Google and a good pot of coffee could be one of the best investments you make in your future. Below are a few links to get you started. If you find something else that’s really helpful, please share a link in the comments below!

What is interest?

What is a mortgage?

How does our economic system work? Check out our three-part series (part one, two and three).

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