Have Millennials Bet Too Big On Homeownership?

It’s no secret that home prices in the United States are continuing to rise, while wages remain static. The result? Americans are spending a greater percentage of their income on housing than ever before.Here at Hometap, we wanted to know how this gap between wages and home prices impact today’s homeowners, so we went out and surveyed more than 600 homeowners who had owned their home for at least 5 years. We asked them their views on all things homeownership related including, whether or not owning a home was still equated to achieving the American Dream, the realities of daily financial strains, and attitudes on the 2008 housing crisis 10 years later.

As to be expected, results from our survey showed that millennials are facing increased financial burdens and constraints due to skyrocketing student debt. However there were a few findings that surprised us, such as the higher resilience and confidence levels expressed by baby boomers regarding homeownership following the 2008 housing crisis. Read on to learn more and see how today’s millennials homeowners are both struggling and thriving in a time when the notions of ‘house rich’ and ‘cash poor’ are more relevant than ever. This is the final post of our three part series that breaks down the overall research findings as well as examines the differing views of the younger and older generations of homeowners. Read Part One and Part Two.

Getting out of debt – whether it’s student loans, credit cards, or personal loans – is a challenge in itself, especially when paired with housing costs and trying to save for personal retirement all at once. On top of that, when adjusting for inflation, the average millennial worker earns $10,000 less than their parents’ generation did at the same age, which equates to roughly 20% less purchasing power.

Strapped for Savings

On average, student debt for millennials is double that of the previous generation. It’s no wonder that 68% of millennials surveyed by Hometap cite debt as one of their biggest daily concerns — that’s 33% higher than their boomer counterparts. Millennials are already buried in debt and concerned about savings, and report that more than 50% of their salary goes directly to their mortgage payments each month.

As the latest projections call for Social Security to run out of money in 2034, saving for retirement has become top-of-mind for financially-savvy millennials. 85% of millennial homeowners report that they are personally saving for retirement because they believe they will never receive a social security benefit from the government.

When it comes to the 2008 Housing Crisis, concern lingers

Although their boomer counterparts came out of the 2008 housing crisis optimistic and virtually scar-free, millennials remain guarded and concerned. Upon reflection, millennials are 71% more likely than boomers to say the 2008 housing crisis made them fearful and more cautious about owning a home.

Going Too Big for the Home?

The national cost, on average for a starter home in the United States is $160,000 however, millennials report spending an average of $260,000 on their first home — well above the national average.

86% of millennials agree that making a large investment in their home is money well spent, especially because 91% believe their home’s value will go up in the future, despite increased caution following the previous housing crash.

With 88% of millennials equating owning their own home with a higher level of success than renting, it’s no wonder that when it comes to homeownership, millennials are going big.

Millennials are striving to keep the American dream alive, but they want more options

Today, millennials make up the largest segment of homeowners, and have already begun to amass equity in their properties, with the average amount hovering around $90,000. However, less than 30% of millennials consider equity something they can easily access if needed. More than half stated they have never even considered the traditional options currently available to them to access their equity, like a HELOC or refinancing.

With debt being a major concern for millennials, it makes sense that 75% of those surveyed by Hometap would be open to considering options that allowed them to convert that home equity into cash without taking on additional debt.