Buying a home is a significant milestone, and even today, a new Harris poll for KB Home shows that 82% of Americans strive for that "American Dream." New research from RE/MAX validates this too, presenting that two-thirds of Millenials and Gen Z cite being ready for this milestone. Despite over half of the country feeling that they're in a worse position than prior generations, homebuyers share good vibes over the notion of buying a home. The obstacles that buyers face in this economy aren't unique to any single age group; first-time buyers and experienced homeowners face high house prices and stringent lending criteria. Even repeat buyers often lack the knowledge to navigate swiftly in a competitive real estate market. While these challenges may seem overwhelming, the data still highlights consumer determination and optimism.
Both studies revealed many surprising statistics for Gen Z and Baby Boomers, and they help to reframe what homebuyers should consider as they plan to purchase a home.
Find Your Motivation
Motivation and mindset go a long way. Though 85% of homebuyers are at least somewhat nervous (especially about buying a money pit), leaning into feelings of pride and extruding confidence can make it easier to navigate the unknown. KB Home’s study showed that men are more likely than women to feel motivated (35% vs. 28%) about buying a house, and they're also less nervous than women about finding “the right home for them” (73% vs. 77%).
Make it Work
Making reasonable concessions can fast-pace your savings. 3 in 4 homebuyers are nervous about being able to afford a home, much less find the right home. Furthermore, solo homebuyers are also more likely to fixate on finding the right partner to help them buy one. Most surveyed were willing to go to great lengths to save for a down payment, whether it be to spend less on non-essential items, take on a second job or side hustle to improve opportunities for saving for a larger down payment, or to serve as a cushion just in case you do buy a money pit. Gen Z is even more likely to use their savings (42.8% of them, at least) to cover financing. Only 10% of Gen Z and Millennials expect to have assistance from family members, according to RE/MAX research. KB Home’s data also showed that men are more likely than women to be willing to live with others in order to save for a down payment (52% vs. 43%).
Challenge the Myths
Longstanding myths can be a deterrent during the buying process. It's important to remember that you're not overwhelmingly in a worse position than your parents and grandparents. While sale prices and property taxes have changed due to current market inflation factors, mortgage lenders are motivated to deliver competitive interest rates so homeowners can have a lower monthly payment. "More than half (54%) believe — incorrectly — that mortgage rates are at an all-time high, and 1 in 6 aren’t sure at all whether they are at the highest. In fact, the highest rates on record were in 1981, when the 30-year fixed rate peaked at 18.6%, much higher than today," states a representative from KB Home.
Close the Knowledge Gap
Take the time to learn about the many aspects of home buying. Read a lot, use the mortgage calculators, and talk to your real estate agent, mortgage lender, and attorney to gain as much knowledge as possible about the key terms and the process. There is so much information available out there! The survey showed that the majority of Americans have a poor understanding overall, while only half were able to correctly identify terms like APR (Annual Percentage Rate) and PMI (Private Mortgage Insurance). Data also shows that only about 1 in 3 people know key facts about financing a home, including that a minimum down payment of 20% is not required. That can save you thousands of dollars upfront (or years of time spent saving). Also, did you know that you can qualify for a mortgage with a credit score in the 500s? (Only 28% of respondents of the KB Homes did.) Take the following steps into consideration before you make a game plan and start house hunting:
- Consider how closing costs and real estate agent commission fees play a role in the bottom line
- Take steps to improve your credit score
- Explore your desired price range, and deeply consider what defines a dream home for you. Also consider the type of property you aspire to buy.
- Organize all of your tax returns so you can showcase your ability to pay (this is important for any mortgage loan)
- Determine the best type of loan for your needs (and the market conditions)
- Learn the definition of these key terms: Title Insurance, Earnest Money, Income Ratio, Jumbo Loan, Conventional Loan, Government-Backed Loan, Investment Property
- Consider the importance of access to public transportation or parking
