BAM Key Details: 

  • A new report from Real Estate Witch shows high interest rates are the number one barrier to homeownership for millennials, followed by high home prices and saving for a down payment. 
  • Of those planning to buy a home in 2024, 67% regret not making a home purchase when rates were lower. 
  • 78% of millennials say they’re open to buying with mortgage rates higher than 7%, with 68% saying they plan to refinance if rates go down. 

Since reaching a record low for affordability last year, the housing market has made some measurable progress toward making homeownership more attainable for younger buyers. 

That said, according to new research by Real Estate Witch, high interest rates are still the number one barrier to homebuying for millennials, with 67% saying they regret not buying a home when rates were lower. 

Nearly all of the millennials in the survey (93%) said the real estate market impacted their plans to buy a home, and 76% are worried that market conditions will get worse for buyers before they can finally make a home purchase. 

Fully half of millennials with plans to buy a home by the end of 2024 pointed to interest rates as a barrier to homebuying (50%), making it the number one obstacle, followed by high home prices (46%) and saving for a down payment (42%). 

Real-Estate-Witch_Biggest-barrier-to-homebuying-for-millennials

High interest rates have altered homebuying plans for 96% of millennials 

Nearly all of the millennials in the survey (96%) say high interest rates impacted their homebuying plans, while 70% pointed to inflation as an obstacle. 

Almost two-thirds of millennials (66%) say high mortgage rates make it a bad time to buy a home, and while that isn’t stopping millennials from buying, it is making an impact on homebuying plans for 96% of those pushing through the higher costs. 

Half of them (50%) are saving more for a home purchase, while 40% are increasing their housing budget. One-third are also planning to— 

  • Make a larger down payment on a home (33%)
  • Buy a less expensive home (33%)
  • Put their homebuying plans on hold (33%)

Buy now, save later?

More than three-quarters of millennial homebuyers (78%) are open to buying a home when mortgage rates are higher than the national average of about 7%; 65% would even accept 10% or more, while 23% are open to buying with rates at 15% or higher. 

The reason for this readiness to take on higher mortgage payments at the outset could be the high percentage of millennials (68%) who plan to refinance if rates go down. 

Financial barriers and concerns

Most millennials (95%) say they face financial barriers to homeownership. So, while many remain determined to buy a home, nearly half (47%) plan to put down less than 20% as a down payment. 

One in four (25%) worry they won’t qualify for a mortgage loan. And for many, that comes down to a high debt-to-income ratio and a short supply (or complete lack) of savings. 

According to the Real Estate Witch survey, over half (57%) of millennials have $10K or more in debt (57%), which is more than twice the share with $10K or more in savings. 

Homebuyer expectations and concessions

Of the millennial respondents who don’t yet own a home, most were open to buying homes with major physical issues, including—

  • Asbestos (67% were willing to buy a home with this)
  • Mold (62%)
  • Foundation issues (58%)

Nearly eight in ten (79%) would pay more than the asking price to compete for their dream home—down from 85% who said as much last year (2023). 

About two in five millennials (42%) expect to make concessions on the physical condition of the home they purchase, while 29% are prepared to make financial concessions. 

A significant share of millennials also expect to— 

  • Pay a higher mortgage rate than they would prefer (39%)
  • Make multiple offers (36%)
  • Max out their budget (30%)
  • Pay more than the asking price for a home (29%)

Millennial homebuyer regrets

Given our national inventory shortage and the higher housing costs, it’s not surprising that nine out of ten (90%) millennial homeowners say they have regrets about their first home purchase. That’s up from 82% in 2023. 

Common regrets include— 

  • a less-than-desirable location (27%)
  • difficult neighbors (26%)
  • high mortgage rates (25%)

The hidden costs of homeownership were also a source of homebuyer regrets among millennials. Though many knew to expect these costs beforehand, the actual toll exceeded expectations, leading to regrets: 

  • 18% regret the amount of upkeep their home requires
  • 16% regret the higher-than-expected cost of that upkeep
  • 16% regret the higher-than-expected total cost of homeownership

On the flipside, about two-thirds of millennial homebuyers (68%) regret not buying a home when home prices were lower. And to buy a home now (or within the year), many are willing to go to extremes to accomplish that. 

A significant share expressed a willingness to—

  • Get another job (32%)
  • Move to a more affordable rural area (21%)
  • Rent out a room of their house to help with the mortgage (17%)
  • Skip other debt payments (16%)
  • Create a GoFundMe (15%)
  • Move to a less safe/developing neighborhood (14%)
  • Delay having kids (13%)
  • Delay their wedding (10%)

Compared to baby boomers, millennials report higher levels of disappointment with their home purchase. While the younger generation is more likely to make rash decisions they later come to regret, boomers typically approach home purchases with more experience and more cash. 

Because of that, boomers (21%) are twice as likely as millennials (10%) to say they have “no regrets” about their home purchase. 

That said, in a decade or so, we’ll likely be saying the same thing about millennial and Gen Z homebuyers. 

Read the full report for more information.