If 2022 felt like The Year of Murky Chaos, get ready for even more changes in 2023. As millennials started to emerge from COVID lockdowns, shift their priorities, and organize their lives around the new normal, the real estate market began to move, too.
The most recent millennial home buyers study had a lot to say about the changing real estate landscape in 2023. Here are the 15 major takeaways from the study.
15 surprising millennial home buyer facts in 2023
1. It’s not an easy road…
Buying a home is hard enough without living through the tail end of a pandemic, low housing stocks, and inflation which means making ends meet is harder than ever. Even the hardest of hearts were challenged during this time — 51% of millennials say they’ve been brought to tears during the home-buying process.
From deciphering real estate jargon to negotiating a real estate commission and understanding the settlement statement, buying a home can be a stressful time. The only thing shocking about a tearful transaction is that the percentage isn’t higher.
2. …and it’s hard to stay optimistic
So it makes sense that optimism might be in short supply. Over 75% of millennials say they think the market will get worse in 2023. This, along with the current level of inflation, has impacted the home-buying plans of 92% of millennials in the study.
3. But millennials are still interested…in interest rates
If it’s not inflation that’s causing trouble for millennials in their quest for home ownership — it’s also interest rates. Just under half (47%) of millennials cite rising interest rates as a main barrier to home ownership.
4. Competition isn’t a thing
On the plus side, millennials don’t cite competition as a major issue. In Clever Real Estate’s 2022 millennial home buyer report, 59% of millennials were worried that the competitive market would kick them out. In 2023? That percentage has shrunk to less than a third (29%).
5. Regrets. They have a few.
Of millennials who bought a home in 2022, 82% of them say they have regrets. One of the most common ones was their interest rate, with 22% of buyers believing they paid too much for the amount they borrowed.
But sometimes they had no choice. When interest rates dropped slightly at the very end of the year, some buyers rushed to reinvest money from a home sale to avoid capital gains taxes. It’s hard to predict what 2023 will bring in terms of mortgage interest rates, but even people who financed a home out of necessity are feeling interest rate regret.
6. Down payments are trending down
Although most millennials recognize the value of a 20% down payment, fewer plan to meet that mark in 2023 (34%) than did in 2022 (62%). Stiff competition for limited stock in 2022 meant the most attractive offer came backed by the most money, but the slower pace of 2023 means more financing options that don’t require as much money down.
When it comes to making an offer on a house, there’s less pressure to have the biggest bank account in 2023. Millennials are taking advantage of buyer incentives and creative financing to help counteract higher interest rates.
7. Saving is on the downward slide, too
Less competition is just one reason a down payment can be lower. Heading into 2023, 54% of millennials have less than $10,000 in savings. Compare this to the percentage of millennials with less than 10K in savings in 2022 (18%) to better understand why millennials are moving more cautiously into homeownership.
8. Some have no safety net
For 20% of millennials, the situation is even grimmer. They have exactly zero dollars in savings.
This becomes especially problematic when the surprising costs of owning a home — closing costs, maintenance, and furniture, among other things — hit.
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9. They don’t have to see it to believe it
Since most millennials start their home search online, it makes sense that professional photos and perfectly executed video matter.
And when it comes to buying a home sight unseen, millennials still set the pace, with 86% of them indicating they’d buy a house without stepping foot into it. This is down slightly from 2022’s record number (90%) but is still a good indication of millennial trust in (and reliance on) technology.
10. Millennials have changed their DIY mindset
Only 65% of millennials in the Clever study would purchase a fixer-upper. This is a large number but a sharp decline from 2022 (down from 82%).
11. And they don’t want to do it anymore
In addition to regretting paying an elevated interest rate, some enthusiastic DIY-ers regretted their purchase of a house in need of work. About 16% (1 in 6 buyers) say they regret it and wouldn’t do it again.
12. Home buyers are expecting to pay…
With the national average home price a whopping $455,000, it’s not easy to get into the market. But 23% of millennials are expecting to pay over the national average for the home of their dreams.
13. …and some definitely do pay
Over a third (38%) of millennials plan to spend at the very top of their budget. This is good news for people selling their homes (but challenging for buyers with lower budgets).
14. …but the budget is a guideline
One thing that continues to stand out about millennials and home ownership is their continued willingness to blow through their budget for their home. Fourteen percent of millennials would offer $100,000 or more over asking for their dream home. This is down from the 17% in 2022 but still a sizable number for this demographic.
15. Personal debt remains the largest barrier
When everything is said and done, debt remains the largest barrier to home ownership. Nearly half of millennials (46%) owe $10,000 or more on things like student loans, credit cards, and car notes. When combined with scanty savings and all of the other factors that make homeownership challenging, this continues to be a major obstacle.
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What millennials have learned
Millennials have been through it when it comes to home ownership. They have seen interest rates sink to historic lows and shoot to stratospheric highs. They have cobbled together their finances and lost bids on homes that have exponentially increased in value in the space of a few months.
This roller coaster ride means that millennial home buyers have become more cautious in 2023 and less likely to leap into a home that costs too much, isn’t quite right, or requires more work. As millennials settle into their careers and families, this market continues to be challenging and unpredictable.
Still, most millennials are dedicated to home ownership and committed to the process. It’s good news for those looking to build generational wealth — starting with their home.