Millennial Home Buyers’ Down Payments Are Coming From Their Own Paychecks
According to the National Association of Realtors, Americans under the age of 37 represent the largest share of homebuyers. About 32% of people looking to buy new homes are first time homebuyers. And despite popular belief, millennial homebuyers aren’t getting the money they need for down payments from mom and dad. According to a recent survey by real estate brokerage company Redfin, up to 72% of millennial homebuyers are funding home down payments with money saved from their paychecks. Since 13% of all buyers cited that saving for a downpayment was the most difficult step in the home buying process, this broad generalization about Millenials is understandable..
Redfin researchers compared data from a March 2018 survey of over 2,000 millennial Americans who said they planned to buy or sell a primary residence in the next 12 months. The survey found that 24% of millennial homebuyers took a second job to save up for a down payment, a 12% decline from 2017.
Redfin’s most recent report is based on an additional survey of over 500 millennials born between 1981 and 1996. Researchers compared the results of the survey to the data taken from March 2018.
Both surveys asked all first-time homebuyers how they accumulated the money they needed for a down payment. Survey respondents could choose multiple answers.
Up to 72% of millennials (69% in 2018) said they saved money directly from their paychecks while 24% (36% in 2018) said they saved money from secondary jobs. Only 18% of millennials (24% in 2018) used cash money from relatives to save for a down payment.
Millennials also accumulated money through selling stock investments (9%), pulling money out of a retirement fund early (7%), contributing less money to their retirement fund (6%), inheriting money (6%), and selling cryptocurrency (3%).
Up to 88% of home buyers take out a mortgage. The more money you put down when you buy a house the lower your mortgage payments are.
Redfin researchers say that the fact millennial home buyers are able to save money from their paychecks to save for a down payment has to do with the 10-year high wage growth for American workers that jumped in February.
Of course, financial literacy and money management skills are key. According to R.J. Weiss, CFP® and founder of the personal finance site The Ways to Wealth, “The success of your financial life lies in the gap between your income and expenses.”
The housing market’s recent stall and rising wages are giving home buyers the opportunity to save for their down payment using just their paychecks. Considering almost 86 people are involved ina singular real estate sale, the consolidation of savings for a down payment can be considered a good thing.
“Unemployment is at its lowest point since 2000,” said Daryl Fairweather, the chief economist at Redfin. “Millennials have never worked in an economy this strong before, and are now finally making enough from their paychecks to save for a home.”
“The fact that they are less often needing to rely on family members or sacrificing retirement savings to fund a home purchase is another sign that millennials are finally gaining their financial footing,” said Fairweather.
A nod toward that financial footing is the fact that 51% of divorce attorneys are seeing prenuptial agreements on the rise among millennials, according to the American Academy of Matrimonial Lawyers (AAML).
“We have less income, we’re starting working later because we’re going to college, which has led us to have student loans and our benefits are worse,” said Brice Carter, a financial planner, in an interview with the Tri-County Times. “Millennials are knocked for being entitled and lazy, but I don’t think it’s warranted.”
