by Christopher Winkler, Manager, Silverwood Capital Fund I
Interesting article by Diana Olick (@DIANAOLICK) over @ CNBC.com that talks about most Millennial buyers remorse after purchasing a home. Almost 2/3 had regrets in one way or another, compared to 44% of US homeowners who have regrets.
Some of the reasons are:
Repairs & Maintenance: Incredibly, they did not realize that as the homeowner, vs. the renter, they have to pay for all repairs, maintenance, and upkeep, as well as taxes, water, and HOA fees, if applicable. If they did not set these fees aside, they are then dipping into savings, or avoiding necessary repairs or taxes.
Location: I guess no one told them rule # 1: location, location, location. This includes avoiding houses on busy streets, next to any number of things like utility lines, cell phone towers, railroad tracks, freeways, high crime areas, or being in lower elevation flood zone areas or next to a creek, river, or such that can flood them out.
Size: Buying too small was another factor. While the trend is smaller, and the Tiny House craze is going full bore, in reality, who wants to live in a house the size of a large garage or bedroom? I need room, I need a home office, and so does my wife and her ever-expanding wardrobe. 🙂
The Internet: At first I dismissed this idea at the beginning of the article, because, I asked myself, how on earth could this hurt? Yet 57% of Millennials use social media in their home search, three times the Gen Xers & Baby Boomers. Only 30% ever visited the neighborhoods they were interested in to look at homes for sale. Neighborhoods change from block to block, and, for example, in South Dallas in the Oak Cliff area, homes that sell for $250,000 on one block, go for $450,000 one block north. And go a couple more blocks south? You might not make it out alive.
Home Prices: While mortgage rates are still low, in many places home prices are at or have exceeded the prices at the peak of the last bubble. So not only are they ignoring higher down payments and higher required credit scores, many Millenials fail to factor in high mortgage payments and the PMI (private mortgage insurance) they will have to pay until they have 20% of the mortgage paid off — and they often fail to consider an unexpected disaster like loss of a job, spouse, or limb.
What I am getting at is another possible mortgage storm is brewing for not only the Millennials, but, in fact, for all new homeowners.
“Home buyers regret” — yet another trend to be aware of…
Silverwood Capital Fund I