Mortgage Watch | July 23, 2018

New Study Shows Millennials Still Believe in the American Dream

A recent 2018 Bank of the West study dealing with the buying habits of millennials indicates the equity-shy demographic is now turning to real estate as the cornerstone of their investment portfolio. Homeownership is emerging as the most popular ingredient of their American Dream (56%), followed by debt pay-off, and the goal of a comfortable, early retirement (49%) as the second and third most critical components.

The study shows how millennials’ desire to own a home is pushing some to risk their other goals by taking on mortgages, with one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.

Builder Magazine quoted Ryan Bailey, who heads up Bank of the West’s Retail Banking Group. “Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face. The fact that nearly one in three millennials who already own their homes have dipped into their retirement nest eggs to finance their down payment is alarming.”

The study suggests millennial homeowners may be rushing into a home buying decision without asking all the right questions, citing 68% having reported buyer’s remorse regarding ill-prepared going into the purchase and 44% have issues with space itself. Many feel that soon after they closed escrow, they felt stuck in one place with a house that either had unnoticed damage or didn’t work for their family. A full 41% cited financial regrets, saying they felt stretched too thin financially, either dealing with home maintenance expenses or not having waited long enough to save up for a larger down payment.

“A white picket fence can certainly be a smart investment. To help avoid buyer’s remorse, millennials should consider covering their bases and kick the proverbial tires—reflecting on their physical and financial wishes for their home before they sign on the dotted line,” said Bailey.

According to the Builder article, timing has worked against millennials when it comes to home-buying. Most weren’t ready to close on a home when housing prices were at their lowest, and interest rates hovered just above zero. For those who may feel ready to buy now, the new Tax Cuts and Jobs Act eliminates some of the homeownership tax breaks (deducting state and local property taxes from federal tax bills) their parents enjoyed.

Despite these setbacks, 4 in 10 millennials in the study are already homeowners, while the rest remains interested in someday owning a home (92%). Despite the housing crisis when homes values fell like rocks, 59 percent still believe it is a good investment or say it makes more financial sense to own than rent.

According to the article, 69% of millennials in the study believe debt-free status is the ultimate dream. 58% say they pay off their credit card balances in full each month, while they try to avoid credit cards in general and are most likely to use cash, checks, or debit cards (59%).

Bailey goes on to say that debt doesn’t have to be a dirty word. “By responsibly borrowing the amount that is just right for their financial situation, millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”


Rates Currently Trending: Higher

Mortgage rates are trending higher this morning. Last week the MBS market worsened by -10bps. This may’ve been enough to move rates slightly higher last week. There was very little mortgage rate volatility last week.

About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.