Millennials Risk Savings So They Can Buy Their First Home

Art by Woshibai

According to survey data published by Bankrate, Millennials, more than any generation before them, tap into their retirement account, live longer with family, and sell off personal items to finance the down payment and closing costs for their first home.

Those measures suggest their level of desperation, as well as the extent of their resourcefulness. Millennial homeowners not only report actively saving more to buy a home than do members of Generation X and Baby Boomers, they also are more likely to have drawn on retirement savings (13%) and to have sold personal items such as jewelry or a car (12%).

The top three reasons they need to get creative to fulfill their home ownership dream included inadequate income (52%), the high cost of living (45%) and unpaid student loan debt (23%).

Deborah Kearns, mortgage analyst with Bankrate, says it is good to see Millennials taking advantage of homebuyer grants and loan assistance programs, “but their desperation becomes obvious when you see them forced to sell off personal items and tap into retirement savings at twice the rate their parents had to.”

“Tapping into retirement savings is a risky move,” Kearns warns. “You might be better off looking into down-.payment assistance programs, special low-down-payment loan programs, or buying a less expensive home to keep your costs more affordable.”

A related Modern Money survey by Ameriprise Financial suggests that most investors (70%) continue to say owning a home is as good an investment as it was a decade ago. Yet, while the clear majority (92%) of respondents were homeowners, and despite many viewing homeownership as a good investment, financial gain was not the primary reason they bought their home. In fact, the top driver was that it gives them “a sense of pride in being a homeowner.”

With these figures in mind, Bill Walker, chief revenue officer at Unison, says his firm’s new approach to providing equity investment backing to individual home buyers should be attractive to many advisers and their clients. Unlike with a home equity loan, homeowners who partner with Unison garner no added debt, monthly payments or interest. Unison can also help prospective home buyers, generally by doubling their down payment. In return, Unison shares in a portion of the home’s value when the owner sells.

Walker notes that the Millennials in his firm’s client base tend to view housing—and especially before they start a family—as more utilitarian than did previous generations.

“For many young people today, a house is a place to call home base for all of their life’s adventures,” he says. “Young people are very open to this idea of the shared economy. We think our approach to making equity investments in homes alongside individuals falls right in line with that.”