3 Common Mistakes Millennials Make When Buying a Home
Are you guilty of any of these?
PHOTO CREDIT: Image via Feverpitched/iStock
Millennials are increasingly coming of home-buying age, and there are a few mistakes that I commonly see among this group. Here are the top three housing mistakes millennials make:
1. Long Term Renting With No Plan to Buy
I’ve heard the theory from many millennials that in today’s economy, it is better to rent long term than buy a home, because there is no way homes can continue to appreciate in any meaningful way. No one has a crystal ball, but looking back at historical trends for the past 50 years should give us a pretty reliable indicator of the future behavior of the market – and history tells us that the future likely holds a sometimes bumpy, but overall upward, trend of appreciation. Also, there are the tax deductions available only to homeowners, and the feeling of stability that comes with being one’s own landlord that I believe will always fuel the trend toward homeownership in the U.S.
2. Waiting For the “Perfect” Home
For many first time homeowners, the most difficult hurdle to buying a home is saving the 20 percent down payment, plus closing costs. As home prices rise, this becomes more and more difficult. To play in the market, one must get in the market by buying (and hopefully getting a good deal on) a home that is within their immediate financial striking range. This is difficult for some, as they want the three bedroom/two bathroom home where they can envision raising their children. The problem is that by the time the‘ve saved the down payment to afford this house, it has appreciated to the point where it is now unaffordable. Had that same couple bought a two bedroom, one bath with potential, they would have ridden the wave of appreciation, had more equity in their home than they would likely be able to save over the same period of time and been able to sell and trade up to their perfect home a few years later.
3. Not Paying Attention to Timing
We typically encounter clients whose number one goal is understandably getting a good deal on their home purchase. The advice that we give is to buy when fewer people are buying — Thanksgiving through Mid-January, or during the month of July, when a lot of people go on vacation and the buyer pool is smaller. A problem arises when buyers don’t pull the trigger on a good deal during this time, and instead wait for “more inventory” in the spring months. While there is absolutely more and better quality inventory during the spring, there are also many more buyers, and drastically less good deals for the buyer. Then, if the buyer doesn’t find the deal that they’re looking for during this hot season, the cycle starts again. The lesson is that if you’re truly prioritizing a good deal, you must be prepared to sift through reduced, less desirable inventory during an off time to find your great deal.
To avoid making one of these common homebuying mistakes, you should select an expert agent who can help you navigate through the difficult waters of your first home purchase.
This content originally appeared on Redfin.com.