Millennial Homebuyers Remorse?
As a Housing Counselor, I work every day to educate and coach clients who are looking to buy their first home. They come to me eagerly hoping to claim their piece of the American Dream of homeownership. My goal is to discover where they financially are today – strengths and weaknesses – then identify what needs to be done to get them “mortgage ready” to seek a pre-approval from a lender. Armed with that pre-approval (and knowledge about the process and players of home buying), they can hire a buyer’s agent, start house-hunting, make an offer and, if the offer is accepted, then see the process through to closing. For some, the journey to “mortgage ready” is fast. For others, it takes a couple of years to establish or fix credit and get finances in order. For most, it takes 6 – 12 months. Everyone gets downright giddy with excitement and joy at the closing table when receiving the keys to their new home. So imagine my surprise driving along listening to the news on the radio recently when I heard a headline stating that “63% of millennials say they have regrets about purchasing their home. Details to follow…” SIXTY-THREE PERCENT!!?? That COULDN’T be right. Of course, I arrived at my destination and exited the car before any details followed. So when I returned to the office, I searched the internet for the complete story. Here’s what I found… The data source was a poll by Bankrate.com of about 1,500 millennial homeowners. And the top reason for regret was: Underestimating the “hidden” costs of buying and owning a home, including on-going responsibilities of maintaining it. It turns out first-time buyers often overlook the costs of upkeep and repairs!! Wow! I guess I was flabbergasted because my co-workers and I always discuss post-purchase upkeep during our pre-purchase seminars and 1-on-1 coaching. Apparently, that topic frequently does not enter the minds of people who do not participate in homebuyer seminars and coaching!! “We’re not renters any more Toto! There’s no landlord to call when stuff hits the fan.” That’s a big “con” of homeownership to consider when focusing on the “pros.” That is also why cultivating a habit of “saving” BEFORE buying a home is so very crucial. There are some great mortgage programs that allow for little or no down payment requirement along with little to no reserves. Sadly, with zero savings in reserve and no habit to save, buyers are setting themselves up for potential foreclosure if they lose a job, get sick, or something big breaks down. Remember the “foreclosure crisis” of a few years ago? “What goes up WILL come down” is a fact about real estate that history has proven right time after time. Below are spreadsheets estimating how much needs to be saved monthly to replace items at the end of their useful lives. The first one is based on a NEW home ($255, monthly) and the second one is based on a 5-year old home ($360, monthly). Those numbers quickly rise when the home is even older and/or the inflation rate is higher. Sure, you can pay for them on credit cards, but wouldn’t it be nice to avoid high-interest costs by having the money already saved? So, don’t catch “millennial buyer’s remorse.” Instead, get infected with the “habit of saving” to prepare for buying and MAINTAINING your new home. Best wishes for success… Dick Patterson