Survey of millennials also shows some are hesitant to put money in markets
Millennials constantly hear that time is on their side, but for the first decade of their adult lives, they have been the victims of bad timing, contends Ryan Bailey, head of the retail banking group at San Francisco-based Bank of the West.
Over the last decade, millennials saw the devastating effects of a market downturn, slow wage growth, and low participation in a bull market, Bailey asserts.
According to the Bank of the West 2018 Millennial Study, these equities-shy millennials have turned to real estate as the cornerstone of their investment portfolio, with homeownership emerging as the most popular ingredient of their American Dream (56 percent).
Following homeownership, half cited paying off debt and having the financial means to retire comfortably as the second and third most critical components, respectively.
And yet, their desire to own a home is pushing some millennials to risk their other goals by taking on mortgages and borrowing against their retirement savings. One in four of those surveyed say they’re willing to withdraw or borrow against retirement funds to finance down payments for a home.
“The fact that nearly one in three millennials who already own their homes have dipped into their retirement nest eggs to finance their down payment is alarming,” Bailey says.
Millennial homeowners might be rushing into a homebuying decision without asking all the right questions. Sixty-eight percent reported buyer’s remorse, wishing they had been more prepared going into the purchase. Forty-four percent had issues with space itself, saying that once they inked the deal, they felt stuck in one place, realized there was damage to the house or discovered that the space didn’t work for their family. Further, 41 percent cited financial regrets, saying they felt stretched too thin financially or they should have put more money down from the start.
Time has worked against millennials when it comes to homebuying, he asserts. Most millennials weren’t ready to close on a home when housing prices were at their lowest and interest rates hovered just above zero. And for those who might now feel ready, the new Tax Cuts and Jobs Act eliminates some of the homeownership tax breaks, removing the ability for homeowners to deduct state and local property taxes from federal tax bills.
Despite this, four in 10 millennials in our study are homeowners already, with nearly all others interested in someday owning a home (92 percent). Although they saw how quickly home values can depreciate during last decade’s housing crisis, 59 percent still believe it’s a good investment or say it makes more financial sense to own than rent.
Sixty-nine percent of millennials in the study believe that you have really only made it when you’re free of debt. Just under 60 percent say they pay off their credit card balances in full each month. And when it comes to paying for everyday purchases, they’re a mixed bag. When paying for items in person, six in 10 say they avoid credit cards.
Yet, the study indicates millennials are comfortable on some level with leveraging themselves for certain express purposes, such as homeownership-a purchase that puts most people into debt for decades. Over four in 10 millennials don’t pay their credit card balances off in full each month. Sixty percent of the group says it feels comfortable carrying this revolving debtincluding two-thirds of those who are already homeowners. And when making online purchases, just over half is more inclined to use credit cards or credit card rewards, such as cash back or points.
Millennials feel overwhelmingly confident in their own ability to use financial products, including common investment vehicles. Millennials also have age-appropriate attitudes toward asset allocation, with two-thirds agreeing that the more time they have until retirement, the more aggressive they can be with their investing strategy, Bailey says.
This article provided by NewsEdge.