Many of my friends pride themselves on being independent. Sure, their parents may have helped out during college, but now they see themselves as being fully on their own. There is, however, an exception that comes into play when these same friends consider buying their first home. Once again, their parents will be helping them out.
It turns out my friends aren’t alone in receiving assistance. The majority of American millennials buying homes for the first time expect their parents to help them out. Some of them will receive assistance — both financial and otherwise — from mom and dad without even asking for it.
A survey commissioned by Bank of America and conducted by Braun Research Inc. interviewed more than 800 millennials between the ages of 18 and 34 who intend to buy a home in the future. The results were not completely surprising, and yet they were illuminating about the needs and desires of prospective first-time homebuyers.
A Little Help
The survey found that two-thirds of millennials expect some sort of help from their parents when they eventually purchase their first home. Almost half of the respondents expected the help to come in the form of non-financial assistance, such as help moving in and advice on which home to buy.
A fifth of the respondents expected to receive money for a down payment, with another fifth expecting assistance in furnishing the home. Fifteen percent of the respondents expected money to help with the monthly mortgage payments.
That help comes with some strings attached, as the survey respondents said that their parents will have a say in how much to spend, where to move and which home to buy.
While most of the millennials in the survey expected help from their parents, they don’t necessarily feel entitled to that assistance. A quarter of the respondents said their parents offered to help, while only 10 percent asked for it outright.
The Habits of the Young and Not-so-Rich
Only a few of my friends actually own a home. The friends that continue renting are either doing it by choice because they’re not ready to settle down yet, or they’re renting because of way too many other financial priorities.
The survey breaks down the reasons millennials haven’t purchased a home yet:
- 32 percent of millennials say they can’t buy a home because they’re paying off debt.
- More than half say they can’t afford the type of home they want.
- A quarter said that they don’t need a home at this point in their life.
Although the housing market has made an impressive recovery in the past few years, potential first-time homebuyers are being pushed out of new sales for the exact reasons that the survey found.
In 2015, first-time homeowners accounted for just 32 percent of all home purchases. The year before, that number was 33 percent. Historically, first-time homeowners accounted for 40 percent all home sales. Now it’s the lowest it’s been since 1987.
While young adults are unable to purchase homes as easily as they could have a generation or two ago, potential first-time homebuyers have clear ideas of what sort of homes they’d want. They’re more aware of the maintenance costs involved with homeownership, and tends to be more fiscally responsible about mortgages.
For the majority, a single-family home in the suburbs remains the most common goal. First-time homebuyers are also three times as interested in buying a townhome as experienced homebuyers. This could have something to do with cost, as first-time homebuyers have fewer means than the older generations.
One trend that seems to be falling out of favor is the need to have an enormous home. Only 47 percent of survey respondents reported that square footage was extremely important to them when deciding to buy a home. For the majority of people, the cost, neighborhood and then the floor plan (in that order) were the most important.
A Sign of the Times
The survey might not reveal anything completely shocking about millennials and the housing market, but it paints a big picture about all the factors impacting the industry. The reliance on parents and the debilitating debt the survey respondents are dealing with show that younger first-time homebuyers will remain a minority for now.