Millennial First-Time Buyers Often Unaware Of Steps To Home Ownership

Millennials
Photo courtesy of Adelina Martin via Flickr.com

Millennials are often locked out of the real estate market and, given the mounting obstacles to home ownership, many feel “tortured” by it. Now a new study by Nobul, a digital website that matches buyers with agents, has released the results of an online survey of more than 400 millennials.

The conclusion? Millennials are woefully unprepared, perhaps even naive, about the steps to take in buying a house – even after they’ve saved long enough for that dreaded down payment. First-time home buyers account for 68 per cent of surveyed millennials who plan to buy a home in the next two years.

READ: One In Five Millennial Home Buyers Commit Mortgage Fraud: Survey

The study finds that while 67 per cent of prospective millennial home buyers agree that finding the right agent is essential for a successful home purchase. However, only 4 in 10 millennial homeowners considered more than one agent, and 75 per cent hired the first agent they met. In part, this is due to the lack of research millennials put into the process.

This is somewhat concerning considering the fact that millennials – and other age groups – spend at least 20 minutes scrolling through Netflix before ultimately choosing what to watch. When it comes to awareness of the commission structure when buying and selling real estate, 38 per cent of prospective millennial home buyers know nothing, or very little, about average commission rates.

Another source of disillusionment for millennials is the overlooked costs of owning a house. In the United States, millennial homeowners are also expressing regret over not knowing the full costs.

READ: First-Time Home Buyers Incentive Limits Torontonians To Buying Condos

“The study clearly shows that while millennials value home ownership, with many planning to purchase soon, they don’t completely understand the costs,” stated Regan McGee, CEO, Nobul. “Industry stakeholders need to take more responsibility in creating transparency in real estate transactions, especially as it relates to the costs associated with buying and selling a home. Nobul is ahead of the game and offers just that to consumers – accountability, transparency and ultimately thousands in savings when they buy or sell a home.”

Can you blame them? Given the vast amount of social pressure placed on Canadians – both young and old – to own their own home, it’s no surprise that one in five young adults admits to lying on a loan application.

When it comes to overall affordability of a home, one third of prospective millennial home buyers surveyed state housing prices are affordable in the area they plan to live despite the average bungalow costing $521,250 nationally and an average millennial after-tax household income of $44,093.

READ: Report Reveals Harsh Reality Millennials Face When Saving For A Home

This paints a troubling portrait of millennials attempting to shrink the gap between the huge cost of home ownership and their average earnings. CTVnews reported that in order for houses to be affordable, they would literally have to drop by half – approximately $223,000.

There’s also a growing resentment towards the government constraints against home ownership introduced in 2018. The B-20 mortgage stress test requires owners to plunk down at least 20 per cent down payment and need to qualify at the Bank of Canada’s five-year benchmark rate or tack 2 per cent onto their contract rate – whichever is higher.

“The reason we started Nobul is to offer people transparency and choice when it comes to one of the largest purchases they will ever make,” added McGee. “Our mission is to empower a new generation of homeowners to feel confident in their home purchase and disrupt the industry status quo, for good. ”

Now if only real estate info could be displayed like Netflix shows…

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