Millennial Homeowners Do More Renovations – Face More Debt and Stress
Homeownership can be compared to a vintage wine, as it usually improves with age. In a recent real estate industry study, 1,000 homeowners in the U.S. were surveyed and most expressed feeling good about home ownership. They reported that their buying decision gave them pride, comfort, security and happiness.
However, this is not the case with millennials. In this article, we’ll compare baby boomers and millennial homeowners, and reveal the reasons why the latter has more stress about property ownership compared to other generations.
- While just 13% of boomers said they felt stressed because of their homes, millennials are much more likely to have tension about homeownership.
- About 50% of millennials also expressed some remorse after their purchase.
- The main reason for their stress is that 67% of millennial buyers made less than a 20% down payment, which means they have to pay higher mortgage installments.
- Millennials have planned 49% more home renovations in the near future compared to boomers. Millennials are twice as likely to utilize a credit card and three times likelier to obtain a personal loan for renovations, compared to boomers.
- 43% of millennial buyers said the costs of home maintenance surprised them.
- Millennials were much more likely to utilize their homeowner’s insurance in the last 12 months. They were also more likely to purchase a fixer-upper.
Analysis and Insights
Millennials face more stress about homeownership compared to boomers.
This is not surprising as millennials have owned homes for much less time. 61% of millennials have been homeowners for less than five years. In comparison, 68% of Boomers have been homeowners for more than 10 years, so they are more experienced and better comprehend the financial expenses and time investment of homeownership.
Millennials are often struggling with financial instability and student loans, and that’s why homeownership can be a stressful responsibility for them. For this reason, 51% of millennial buyers expressed remorse about their home purchase compared to just 20% of baby boomers.
So, why are millennials so distressed?
- Millennials are making less down payment and shelling out more in insurance, taxes, and prinicipal interest every month.
- They are purchasing fixer-uppers that need big renovations.
- They are utilizing high-interest credit cards and loans to fund their projects.
67% of millennials made less than a 20% down payment.
Because of this, millennials have to pay more in monthly mortgage installments. In addition, they have pay to PMI (private mortgage insurance) every month until they gain 20% home equity. Most of the boomers have paid all of their PMI, but most millennial homeowners are far from reaching this objective.
Millennials may express regret because of maintenance problems and high mortgage payments every month. They can remedy these concerns by saving enough money for a higher down payment as well as money for repairs. Millennials are utilizing first-time property purchaser loans, like the WHEDA loan, which enables them to buy a home with less of a down payment.
Millennials are likelier to purchase a fixer-upper and implement big renovation projects.
Compared to other generations, millennials are more likely to purchase a fixer-upper. They are also investing more resources and time into home renovations, maintenance and repairs compared to boomers.
Younger owners can save some money on their mortgage premiums by buying an “as is” home, but this type of decision can lead to long-term expenses for repairs and renovations.
27% of millennial buyers have utilized their homeowner’s insurance in the past year compared to just 6% of boomers.
Though it will not increase the monthly premiums, repeated claims for homeowner’s insurance can result in the provider cancelling the account.
80% of millennial owners and 70% of boomers have planned renovations in the near future, but millennials have planned 49% more revamping projects than boomers. Millennials have planned three to four big projects in the next five years, compared to two or three by boomers.
Millennials like to implement kitchen renovations, bathroom remodels, flooring, new patios and decks, and landscaping. A study by Home Advisor shows that homeowners typically underestimate the expenses of home improvement projects before starting. 43% of homeowners were surprised at the costs of home maintenance. Because of this, new homeowners are forced to use high-interest personal loans and credit cards.
Millennials are much more likely to utilize a credit card or personal loan to fund renovations.
82% of boomers are utilizing cash to fund their projects, while millennials are three times likelier to leverage personal loans and twice as likely to utilize credit cards.
These products are expensive: Depending on the credit score of the borrower, personal loans have an average APR (Annual Percentage Rate) of 10% to 30%, while credit cards have an average APR of 17.5%.
30% of millennials are planning to pay upfront cash for renovations, while 39% intend to leverage only financing. The other 31% will use a mix of financing, cash, and help from their parents. Millennials don’t favor home equity loans as they have less equity compared to boomers.
Millennial homeowners are relatively inexperienced and the responsibilities and costs of property ownership are affecting their finances and their emotional state.
The data used in this article has been obtained from a web survey implemented by Pollfish and initiated by Clever Real Estate. A total of 1,000 homeowners were asked about their thoughts on homeownership, renovations, maintenance and the related costs of homeownership.