More than two-thirds of potential first-time homebuyers believe it’s currently a good time to buy a home, but three-quarters of them admit they’re overwhelmed by the process.
Those are the findings of TD Bank’s latest First-Time Homebuyer Pulse study, which surveyed more than 850 millennials who are planning to buy their first home in 2020. Although 52% of respondents were actively searching home listings online, many have yet to take steps to prepare financially for the big purchase.
Only 42% of millennials said they have established a budget for their impending home purchase, while only 53% have reviewed their credit report. Fifty-two percent of respondents have started saving for a downpayment and 30% have spoken with a mortgage lender.
“It continues to amaze me how many buyers begin their home search without first speaking with a mortgage lender,” said Rick Bechtel, head of U.S. 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.”
Despite the preponderance of tech-driven mortgage processes, a scant majority of millennials would rather begin the loan process with a human touch. Fifty-two percent said they would prefer to start their mortgage application in person with a lender, compared to only 34% who prefer to do so exclusively online.
The preference for an in-person contact may be due to millennials’ various ongoing trepidations about the homebuying process and the housing market. In addition to being overwhelmed, 70% view the housing market as “fragile,” while 36% percent said they think homes are overpriced. Twenty-two percent said steep home prices in the neighborhood where they want to live has prevented them from buying a home to this point.
The lingering impact of the Great Recession also continues to color millennials’ impressions of homebuying. Sixty-seven percent of respondents to TD Bank’s survey said they are “familiar with the housing crisis.” Of that group, 55% said their family or a family they knew lost their home. Forty-seven percent said that growing up during the crisis has made them more nervous to purchase a home.
Notably, 85% of those who said their families lost a home during the Great Recession said that they will receive financial assistance from their parents when it comes time to purchase a home of their own.
These experiences have contributed to the generation’s apparent willingness to wait before jumping into homeownership. Despite 69% of respondents reporting “feeling obligated to purchase a home at their current life stage,” 84% said they would prefer to delay the purchase of a home until they find the ideal place. Seventy percent said their expectations for their first home are higher because of the amenities they have at their current residence.
“The millennial cohort of homebuyers is unlike any other in history,” Bechtel said. “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.”