Millennials Regret Buying Homes

Millennials are not eager to own a home and those that have made the leap have regrets according to a new poll by Bankrate. The Millennial generation is already off to a slow start when it comes to buying homes. U.S. Census Bureau data shows that about 1 in 3 millennials under the age of 35 own a home. This is about 9 percentage points lower than the previous generation. 

However, the millennials that have purchased a home often suffer from buyers’ remorse. Almost two-thirds, a whopping 63 percent of millennials (ages 23 to 38) claim they have regrets about purchasing their home according to a poll done by Bankrate that questioned 1,500 homeowners. 

This number drops dramatically, down to 35 percent when the question is put to baby boomers and about 50 percent of Gen Xers have regrets about their home. 

Why They Have Regrets

The big reason that millennials regret purchasing a home is that they underestimated the hidden costs of buying and owning home, which includes the responsibilities that come with maintaining a home. 

According to experts, this is a fairly common regret and it can be an expensive mistake. It can be easy to just compare your current rental payment to a mortgage payment and decide you can afford a house but this is often a big mistake.

Homeownership comes with tons of additional costs that can quickly add up which can put your mortgage payment into the unaffordable range. Homeowners insurance, property taxes, and closing costs can easily add up to 2 to 5 percent of the homes price and many new homeowners forget to consider these costs when shopping for a new home. 

The pain doesn’t end at closing though, maintaining a home and lawn can be expensive as well and if you are not fully prepared for these expenses, it can put a strain on your budget.

Common Mistakes of First Time Homebuyers

One of the biggest financial mistakes that first time homeowners makes is seriously underestimating the cost of upkeep and repairs. According to HGTV data, homeowners should budget between 1 to 3 percent of the purchase price of their home on annual upkeep. 

This means that if your home costs $400,000 you should expect to spend between $4,000 and $12,000 a year maintaining your home. This kind of money can put a serious strain on an already tight budget if you have not planned ahead for these types of expenses. 

Unfortunately, millennials are often struggling to afford the down payment and simply do not have the budget to properly maintain their home. Data shows that roughly 1 in 3 millennials had to take on a second job in order to afford the down payment. 

Experts recommend starting simple with a starter home that you can easily afford and moving up to a bigger “dream house” once you are more established. Always factor in additional costs such as homeowners insurance and property taxes when you are setting a budget for a new home. 

Affordable Houses in Short Supply

Another factor that is hitting millennials hard is that there is a short supply of starter or affordable homes on the market, which pushes many millennial buyers to purchase a house that is above their comfort zone.

In numerous cities across the country, this is especially true in coastal areas, home prices are well out of reach for new homebuyers. According to Redfin, only 67 percent of available homes in 2018 in metro areas were affordable for millennials, which is down from 71 percent in 2017. In major cities this number can be even smaller, in Los Angeles for example, only 19 percent of homes fell into the affordable range for millennials based on their median income. 

Other Millennial Regrets

The cost of maintaining their new home is not the only complaint that millennials have about homeownership.

The poll also found that millennials are not thrilled about the location of their home with 10 percent saying their biggest regret is the location of their home. This may be caused by the fact that they have had to settle for homes in less than their ideal neighborhoods because they simply cannot afford to buy where they would like to live. 

Roughly 18 percent of millennials are not happy about the size of their new home as well. They often regret buying a house that is too small. Again, this may be due to the fact that they cannot cover the cost of bigger home.