Will Increased Savings Drive Millennial Homebuyer Activity in 2018?
- The National Association of Realtors believes that first-time homebuyers may be more active in 2018, thanks to a thriving economy and growing wages.
- Nearly half of millennials report having at least $15,000 in the bank, while just one-third had saved that much in 2015.
- Nearly 60 percent of millennials have a savings plans, compared with about 40 percent of Gen Xers.
A new report forecasts that first-time homebuyer activity will increase this year, and if that comes to pass, one reason may be because millennials’ financial-planning habits have notably improved over the past few years.
The National Association of Realtors’ December home sales report projects that first-time homebuyer activity should see an uptick in 2018. As of December, first-time buyers represented 32 percent of all transactions, unchanged from one year earlier. That number increases slightly when viewed on an annual basis, with first-time buyers representing 34 percent of all home purchases in 2017.
“Rising wages and the expanding economy should lay the foundation for 2018 being the turning point towards an uptick in sales to first-time buyers,” NAR Chief Economist Lawrence Yun said. “However, if inventory conditions fail to improve, higher mortgage rates and prices will further eat into affordability and prevent many renters from becoming homeowners.”
Besides a lack of available starter home and mortgage rate increases, millennials and other first-time buyers face additional challenges, including rising home prices and student debt. And although previous studies have reported that millennials are failing to establish savings plans, new survey results show that they are getting better about socking away money.
Bank of America’s 2018 Better Money Habits Millennial Report found that 47 percent of 23-to-37-year-olds have at least $15,000 in the bank, while 16 percent have managed to amass $100,000 or more. That’s a significant improvement from 2015, when just one-third of millennials had saved $15,000 and only 8 percent had socked away $100,000.
The report also reveals that millennials are at least as good than Gen Xers when it comes to financial planning. Roughly two-thirds of both generations are saving money each month, and 54 percent of millennials and Gen Xers report that they stick to a budget.
In some cases, millennials are doing even better with their finances than the generation before them. Fifty-seven percent of millennials report having a savings goal, compared with 42 percent of Gen Xers. Fifty-nine percent of millennials say that they are financially secure, while 54 percent of Gen Xers agree with that sentiment.
Although millennials’ money-management habits have clearly improved over the past few years, it remains to be seen whether that will help more of them enter the housing market. Just one-third of millennials say that their nest eggs are specifically earmarked for a down payment, and 20 percent are concerned that they cannot afford a home given the current challenging market conditions.