Are you considering buying or selling a home in the next few years? It’s critical to understand what current Millennial home buyers are thinking about — what they want, where they are looking, and what they regret about the purchase of their last house. And when it comes to regrets, millennials have a few. 

In a new survey of 1,000 millennial home buyers, the real estate website Real Estate Witch found that more than half of millennials (51%) were brought to tears from the stress of the home-buying process — and a whopping 82% say they have regrets.

As you prepare to buy or sell a home of your own, here’s what you need to know about the mindset of the largest potential home-buying market: millennials. 

No More Fixer-Uppers

A key characteristic of the home-buying surge of 2021 was millennials’ willingness to purchase a fixer-upper. But that changed last year, as the share of millennials interested in buying a fixer-upper dropped from 82% to 65%. 

These days, more millennial home buyers say they want a house that is move-in ready and requires little maintenance work. The main drivers behind this change are rising interest rates and persistent economic uncertainty.

In fact, Real Estate Witch’s report found that 16% of millennial home buyers said purchasing a fixer-upper was their biggest regret. 

Millennial Budgets Are Busted

During the pandemic, it became common for buyers to pay well above asking price, and millennials are still feeling those effects.

The 23% of millennial home buyers who plan to pay more than the national average for a home know that they might have to change their plans to find the right house. In fact, 38% of those surveyed believed they would have to max out their budget.

It still might not be enough. One in seven millennials (14%) report being prepared to offer $100,000 over the asking price. This is down from the 17% who were willing to go that high the previous year. 

But there is good news, sort of: Only 28% say that competition for housing is an issue heading into 2023. This is down from the height of the red-hot seller’s market, when 59% of potential home buyers found this to be an obstacle.

Debt Is a Major Barrier

Debt continues to be a significant barrier to homeownership for millennials. Nearly half of this generation has debt in the form of student loans and credit cards totaling $10,000 or more. 

The struggle to pay off college and pay down revolving credit lines is compounded by inflation and high interest rates. Millennials are not optimistic when it comes to market conditions, either. About 92% say inflation has caused them to second-guess their home purchase, and another 76% believe economic conditions will get worse. 

And when you add those factors to the 47% of millennials who hesitate to finance a home due to high interest rates, it’s a wonder that anyone in this age group is still even looking. The most common regret among millennials? Nearly 1 in 4 (22%) say their interest rate is too high.

Cash for Expenses Is Scarce

When it comes to paying for critical expenses like insurance on the home they just bought, some new millennial homeowners don’t even have enough saved to pay closing costs. Approximately 54% of millennials have less than $10,000 in savings. This is triple the number who had that little in 2021. For some, the situation is worse, with 20% reporting a zero balance in savings.

Because of this, 62% of millennials plan to put less than 20% down on a home. Without creative financing or other ways to prevent it, this means that private mortgage insurance (PMI) is going to be included in their monthly mortgage payment. These millennial homeowners will have to pay more each month until equity builds and PMI drops off. 

First-time home buyers may also be shocked by a simple fact of life: the necessity of insurance. Homeowners insurance is required for all homes financed by a lender. Should disaster strike, this protects both the homeowner and the lender.

Insurance is generally rolled into closing costs for the first year then divided over 12 months for the term of the mortgage. But, unlike fixed expenses, this number can change, too. 

Not having enough savings to cover basic annual expenses could push some millennials to the breaking point, especially during a recession. In the worst case scenario, an increase in a home’s value means higher costs for insurance coverage, which can significantly impact a monthly mortgage payment.

Preparing for Homeownership

Moving into a new home can be exciting, but millennials face a particularly challenging economy in 2023. As you enter into your prime home-buying years — raising families and settling into careers — it’s time to really think about how much home you can actually afford. If you don’t want to be part of the 82% of millennials with regrets about their home purchase, take the time to consider:

  • How much debt you have (and how you can pay it down)
  • The stability of your job
  • The size of your family (now and in the future)
  • Your wants and your needs

Buying a home just to say you did it is not wise. Although homeownership is the first step to building generational wealth, rushing into a house you cannot afford (or one that does not meet your needs) is only going to end in heartache.

Perhaps you aren’t part of the 86% of millennials who would buy a house sight unseen — but you are part of the 60% who would relocate for a new job, according to a Gallup workplace poll. Being open to a new job (or working from home) means you can expand your search parameters.

And take heart: If you were part of the 28% who delayed home-buying plans due to soaring interest rates, you may see this trend slow in 2023. Although we may never get to the historic lows of 2021, Bankrate predicts a more manageable 5.25% rate by the end of 2023.