BAM Key Details:  

  • Real Estate Witch issued the 2023 edition of their Millennial Home Buyer Report, showing some changes in millennial home buying habits and concerns. 
  • Nearly all millennials (92%) say inflation has changed their home-buying plans
  • Non-mortgage debt could also delay home-buying plans for 80% of millennials

The 2023 edition of the Millennial Home Buyer Report by Real Estate Witch is in. And according to the latest research, 92% of millennials say inflation has changed their home-buying plans. More than 1 in 4 (28%) have postponed home shopping.

Right now, according to millennial respondents, rising interest rates are the number one obstacle to home ownership, with nearly half (47%) pointing to high rates as the main barrier.

Meanwhile, only 29% of them—compared to 59% in 2022—see buyer competition as a significant obstacle.

Here are the highlights of the report. 

The one-two punch deterring millennials in 2023

Millennials in 2023 are being pummeled by the one-two punch of record inflation and high borrowing costs.

After struggling through two economic recessions that depleted their home-buying ability, they’re now faced with one of the most expensive housing markets in U.S. history. Almost half (46%) say homes are too expensive. More than half (53%) say they can’t afford a home. Even 64% of boomers agree that homes are too pricey for millennials.

To bring inflation under control, the Federal Reserve began raising interest rates in March 2022, which brought little relief to millennials. The aggressive policy dulled the pandemic buying frenzy but triggered a rise in interest rates.

Nearly half (47%) of millennial respondents say high interest rates are the number one barrier to homeownership. Among those who’ve been pre-approved for a mortgage loan, 40% say their rate is higher than they expected.

Given that, 81% wish they’d bought a home before the Fed began raising the interest rate. 

Three-quarters of millennials (75%) think we’re in a housing bubble that could burst in 2023, resulting in an era of greater affordability. To housing market experts, that outcome is unlikely. And borrowing may become even more expensive as the Fed plans more interest rate hikes.

With these conditions:

  • 71% say they find home buying stressful and overwhelming
  • 51% say the home-search process has even reduced them to tears
  • 44% say home shopping has had a negative impact on their personal relationships

To learn more about millennial home buyers for their report, Real Estate Witch asked Americans who are planning to buy a home in the next 12 months about their plans, their worries, and the compromises they’re willing to make.

They then compared this data with that of previous years to provide a clear picture of the obstacles millennials are facing in the changing market.

How has inflation changed Millennial home-buying plans

While challenging, it’s not impossible to purchase a home while contending with high inflation. Millennials are responding to these conditions in one or more of the following ways: 

  • Saving more money for a home (59%)
  • Planning to spend more on a home (36%)
  • Delaying their plans to purchase a home (28%)
  • Buying a fixer-upper (26%)
  • Buying a smaller home (25%)

Millennial home buyer beliefs

Fifty-five percent of millennials believe now is a good time to buy a home. But 96% remain worried about home buying and, specifically, homeownership costs (now and in the future) as inflation depletes their savings and further diminishes their buying power.

About those millennial worries— 

  • 43% worry they’ll have to pay for major repairs
  • 41% worry about unexpected or hidden costs of homeownership
  • 39% worry they won’t be able to find a home they can afford

Although more than three-quarters of millennials (77%) still think buying a home is part of the American Dream, 37% don’t think it’s attainable for the average U.S. resident. 

Expectations and regrets in the Millennial Home Buyer Report

Millennial home buyers shared their expectations on home buying and any regrets they have from their first home purchase:

  • Only 42% of millennials expect to make multiple offers on a home—down 52% from 2022
  • Only 29% expect a bidding war—down 47% from 2022.
  • Since 2014, millennials have bought more homes than any other generation
  • 82% of millennial home buyers have at least one regret from their first home purchase
  • For 22%, the most common regret is that their mortgage rate is too high
  • 63% plan to refinance their mortgage when rates go down
  • 21% regret not being more educated about the home-buying process
  • 26% admit they’re not knowledgeable about home buying 
  • 30% admit they’re not knowledgeable about the mortgage process
  • 82% plan to find a knowledgeable real estate agent when they’re ready to buy a home

Millennials also regret— 

  • Buying a home in an area that changed too much (21%)
  • Buying a home in an unfortunate location (19%)
  • Failing to anticipate their future needs for a home (18%)

Nearly two thirds of millennials plan to make down payments of less than 20%: 

  • With inflation eroding millennials’ savings, over half (54%) have less than $10K saved.
  • That percentage is three times what it was in 2022 when only 18% had less than $10K
  • Non-mortgage debt significantly impacts the ability to save money for 80% of millennials
  • 20% have $0 in savings
  • 62% plan to make a down payment of less than 20%
  • That percentage is almost twice what it was in 2022 when 34% made down payments of less 20%

About 86% of millennials would buy a home sight unseen

This was a common practice in 2022 when it was often necessary to make an offer quickly—before the buyer could physically tour the home—to stand a chance at a winning bid. 

  • About 86% of millennials would still buy a home sight unseen—down only 4% from a year ago when 90% of them would make an offer without seeing the house in person. 
  • Only 51% of boomers would buy a home without physically touring and inspecting the property first—27% fewer than in 2022, when 70% would have taken that chance. 

Buying a home sight unseen does have its risks, but millennials could still be persuaded to do so under certain circumstances: 

  • The home is listed at an attractive price point (47%)
  • The home is a new build—with no previous owner (37%)
  • Buyer competition for the home is strong (28%)

As nerve-wracking as it can be to buy a home sight unseen, millennials say it’s worth considering. Only 8% who purchased a home this way say they regret it.

Fewer millennials would buy a fixer-upper compared to 2022

When the going was tougher for buyers—during the pandemic buying frenzy—fixer-uppers were an attractive option for many buyers. Even now, 2 out of 3 millennials would buy a fixer-upper. But, according to the survey, 1 in 6 regrets doing so. 

It doesn’t help that the rising cost of labor and building materials have made repairs and renovations more expensive. And with less competition for homes, fewer buyers are settling for homes that require extra helpings of TLC.

Here are the latest statistics from the 2023 report: 

  • 16% of millennials who bought a fixer-upper home now regret their purchase
  • 65% of millennials would buy a fixer-upper home in 2023—down from 82% a year ago
  • 49% of boomers would buy a fixer-upper—down from 62% a year ago
  • 43% of home buyers worry they’ll be stuck paying for expensive repairs 

That said, a majority of millennials say they would buy a home with the following issues: 

  • Mold (55%)
  • A leaky roof (59%)
  • foundation issues (59%). 
  • History as a former meth lab (67%)
  • Location within a mile of a prison (72%)

Debt is a huge issues for 80% of millennials

Buying a home is challenging enough without a crippling debt burden. And with 46% of millennials in debt to the tune of $10,000 or more, it’s no wonder the cost of buying a home keeps many of them on the sidelines.

Those monthly bills for non-mortgage debts pile up and make it harder to save money and plan for the future: 

  • Almost 1 in 5 millennials (19%) owe $50,000 or more. 
  • Only 20% of millennials have no debt. 
  • The share of millennials owing $10,000+ and looking a buy a home dropped 54% from the year before—when 71% of millennial home shoppers owed that much—suggesting more millennials decided to put their home buying plans on the back burner. 
  • 37% of millennials worry about qualifying for a mortgage, mainly since mortgage applications can be denied for a number of reasons, including poor credit and a low down payment. 

Top takeaways for real estate agents

As an agent, you need to be familiar with home buyer statistics for all the generations you serve so you can better anticipate what they need from you—and what they expect. 

Since millennials now represent the largest generation of home buyers, it makes sense to build your awareness of their predominant habits, attitudes, and concerns—all with a view to serving them better and helping them make the best decisions for them.

With so many of them expressing their regret at not having sufficient knowledge and understanding of the home buying process, be prepared to help them at every step to ensure they feel supported and confident in their decisions as a buyer or seller.