Boston millennial homebuyers lag behind national average

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A recent study by the independent market research company, Braun Research, showed that Bostonians delay buying their first home at a much higher rate than the national average. A number of factors, such as waiting for marriage and children, led to their postponement. The report also explored other notable attitudes and behaviors among millennial buyers that influenced their buying patterns.

The study was sponsored by Bank of America. With approximately 47 million customers nationwide, it has an obvious interest in knowing why and how area residents purchase homes. Like other banks, BofA uses report statistics to modify their mortgage programs to reflect current population trends.

The survey included 1,000 adults nationwide and 300 residents in 10 local markets, who plan to buy a home in the future. The Boston area results reveal that 75 percent of first-time buyers are motivated by aspirational and emotional factors, rather than financial considerations. They mirrored the rest of the country, with 76 percent reporting their personal feelings holding sway in the decision-making process.

The most popular reason for homeownership among 53 percent of the respondents was that they “want a place to call their own,” with 51 percent saying that having a home is “something they have always wanted to do.” Another 33 percent specify that they “want to put roots down.”

Bank of America Homebuyer Insights Report

Bank of America Homebuyer Insights Report

First-time buyers in Boston often delay purchasing a home because they are awaiting a life stage event, such as marriage or children. The local average is 27 percent, which is much higher that the national average of 16 percent, and more than any other market in the survey. One explanation could be that Massachusetts is the most highly educated state in the union, according to a March 30, 2016 Economic Policy Institute Report. The time and debt required for advanced degrees would likely cause a postponement in major life changes and home purchases.

Producing a definition of homeownership also reveals the modern mentality of first-time buyers. In Boston, 62 percent name security as the most important feature of proprietorship. Other defining characteristics include family (59 percent), a place where memories are made and kept (58 percent), and happiness (57 percent).

Almost all local and national millennial buyers, or those between 18 and 34 years old, say they would forgo pleasures and expenditures to own a home. A full 95 percent claim they would be willing to make various sacrifices to realize their goal.

Bostonians also echoed the national trend with their aspirational motivations: 75 percent of first-time buyers say they are looking for a home they can grow into, instead of a starter house that fits their current needs. Most of them are also willing to save more, and pay down debt, to buy a better house.

Cost is also a key consideration among local buyers, with 80 percent citing it as a deciding factor for a prospective residence, followed by neighborhood (66 percent) and floor plan (55 percent). Seventy-two percent wish to buy a single-family home, and 61 percent plan to purchase in area suburbs.

Bank of America Homebuyer Insights Report

Bank of America Homebuyer Insights Report

Local millennials are not above asking for help when it comes to buying a house. A full 85 percent said they would use an outside tool that withdraws money from their paycheck to save for a home. Three quarters of respondents also expect some kind of support from their parents, whether it’s simply to help with the move or provide financial assistance. The latter statistic is well above the national average, which shows 66 percent of millennials relying on parents for help with a new house.

“Homeownership continues to be the foundation for building long-term personal wealth, strong communities, and a sense of stability for families.” — Cathy Pallin

Many banks are also providing more assistance than in the past to facilitate home purchases. They are noting current trends among first-time buyers, such as those in the Braun study, and incorporating them into their business strategies. Cathy Pallin, a Regional Sales Executive with Bank of America, said that she consulted the recent report and adjusted her approach to reflect the new attitudes and preferences among modern homebuyers.

“We considered the trends revealed from the survey that are transforming the ways consumers view homeownership and how real estate professionals can assist today’s homebuyers,” Pallin said. “We’re looking at what homebuyers want in a home, why they’re making the purchase, and the unique preferences of millennials and first-time homebuyers, and we’re applying these leanings to the way we approach today’s buyers.”

Following the mortgage crisis of the Great Recession, many lenders have been eager to help potential buyers make prudent financial decisions. From money-saving tips to assessing the true cost of moving, banks are working more closely with clients to ensure they borrow responsibly. Pallin explained that they “help first-time homebuyers understand how a mortgage fits within their financial picture so they can be confident about their responsibilities as a homeowner.”

In the aftermath of the recession, most banks tightened their lending practices. As a result, many first-time buyers and lower income borrowers had difficulty obtaining mortgages. After much media scrutiny and public criticism, a number of banks responded by launching programs to improve access to home loans.

Bank of America Homebuyer Insights Report

Bank of America Homebuyer Insights Report

Pallin cites new initiatives at her bank, such as the Down Payment Resource Center and their Affordable Loan Solution mortgages, which were designed to address borrowers’ concerns. The latter program requires as little as 3 percent down payment on a single-family residence. To help lower income and disadvantaged borrowers, her bank also started a “Connect to Own” program, which works with nonprofit organizations to provide guidance with budget and credit counseling, as well as offering basic homebuyer training.

For many, including those in lower income brackets, owning is a home a key component of financial stability. And like generations before them, millennials still associate homeownership with adulthood and success — even if Boston locals take longer to achieve it. Banks also recognize that it is in their own interest to promote responsible financial planning, and are adjusting their lending strategies to reflect the latest trends among first-time buyers. Pallin underscored the significance: “Homeownership continues to be the foundation for building long-term personal wealth, strong communities, and a sense of stability for families.”

Contact Mary McCleary at [email protected].