NEWPORT BEACH, CA—In reaction to a recent CNBC article “Millennial homebuyers: Go Big, or Go Home,” Landmark Capital Advisors’ managing director Adam Deermount tells GlobeSt.com that Millennials are holding off on buying homes, in part, because many of them want more than just a starter home. We spoke exclusively with Deermount about how the American dream has shifted for Millennials and why their actions in the homebuying market are often misinterpreted.
GlobeSt.com: What evidence do you have to support your theory that Millennials want more than just a starter home for their first foray into homebuying?
Deermount: A new report from Bank of America shows that the share of first-time buyers fell to just 30% in February, according to the National Association of Realtors. Historically, it should be at least 40%. The common explanation for this has been that there are too few low-priced homes for sale, and that tight credit standards and high student-loan debt take homeownership off the table for young buyers. Those are still valid reasons, but playing into that could also be this young generation’s need for something bigger and better. Sixty-nine percent of those surveyed said they were willing to wait until they could afford that longer-term home, rather than pony up the cash now to buy a starter home. More than half said they didn’t think they could afford the type of home they’d want. Just about one-third cited high debt as a reason for putting off buying. In fact, when looking by generation, more Gen Xers than millennials have deferred purchasing their first home because of debt.
GlobeSt.com: Why is it that have attitudes changed so much in the past few years?
Deermount: This that wasn’t discussed in the article, but I have a theory: When people experience traumatic events in their formative years, it tends to have a large impact on how they live the rest of their lives. For example, those who grew up during the Great Depression, by and large, tended to be more conservative with their money than subsequent generations, largely because of their early experiences. I think that the same thing is at play here. Millennials came of age during a time when there was wide distress across the housing market. Odds are that either their family or friends had some sort of financial issue caused by the housing crisis. I’ve never bought into the tired meme that Millennials never want to own a home mostly because it’s unrealistic for many when the only available alternative as an adult is to be subject to rent increases for the rest of your life. I do however believe that the housing crash has changed attitudes about homeownership in the Millennial generation.
GlobeSt.com: How do Millennials envision their home purchases?
Deermount: This is a group that appears to be entering into a home purchase under the assumption that they may be living in the house for a long time, whether they want to or not. Why? Because there is a good chance that they have witnessed others close to them get stuck in a negative-equity situation early in life and have no desire to get “stuck” in a starter home if the market turns on them. The housing crisis of the mid-aughts may be over, but its residue can be found all over the market today.