Despite all the headlines about how millennial first-time homebuyers are at a severe disadvantage in the current housing market, the pandemic has boosted the fortunes of some.
A recent Redfin study on the housing market found that 31% of millennial first-time homebuyers looking to buy a home in the next 12 months were able to save extra money towards a down payment during the COVID-19 pandemic.
The pandemic has also sped up the homebuying timeline for 32% of the more than 1,500 prospective first-time homebuyers surveyed. Those participants said low mortgage rates played a key role in their decision to buy sooner.
The most common form of saving came from money set aside from millennial first-time homebuyers’ paychecks. Roughly 27% of those surveyed worked a second job in order to make a down payment, while 20% received a cash gift from a family member. Just under 20% sold stock investments for cash used in a down payment.
The U.S. personal savings rate soared to 33.7% in April 2020, up from a pre-pandemic rate of 7.2% in December 2019, according to the Federal Reserve Bank of St. Louis and the U.S. Bureau of Economic Analysis, which track the percentage of personal disposable income saved by Americans in any given month.
The popularity of remote work — and a fatter bank account, for some first-time homebuyers — is fueling demand for spacious homes, while also motivating people to move to entirely different areas, said Steven Majourau, a Redfin agent in California’s Central Valley.
“Roughly half of my clients are people moving to the Central Valley from the Bay Area because they want to live in a bigger home for less money, and a lot of them only need to commute into the city once or twice a week, if that,” Majourau said. “They’re selling a large condo or townhouse for close to $1 million — or a small single-family home for more than $1 million — in San Francisco, San Jose or the East Bay and buying a large house here in the Central Valley for around $700,000.”
Just over a quarter of homebuyer respondents, including those first-time homebuyers, said they were looking at less expensive homes to buy than previously planned. Only 10% said they were looking at more expensive homes than previously planned.
Of those surveyed, 19% said a private outdoor space was the most important factor when deciding on a new home. Roughly the same percentage of respondents said the most important factor was having a large enough living space, and 17% prioritized having enough privacy within the home from neighbors and passersby.
Only 8% prioritized being close to work when buying a new home, underlining the recent popularity of working from home.
Just over a quarter of prospective first-time homebuyers who plan to buy in the next year cited rising prices as a main worry, followed by 25% worrying about being able to find a home they love at a price they can afford. Approximately 20% responded with concerns about mortgage rates, the ability to secure a loan, and not having enough money for a down payment.
After hovering below 3% for a month, the average 30-year fixed mortgage rate popped back up six basis points to exactly 3% last week.
“After months of home prices rising dramatically, buyers are well aware that homes are more expensive now than they were a year ago or six months ago,” said Daryl Fairweather, Redfin chief economist. “Even though people are prioritizing things like space and privacy in their home search, rising prices mean a lot of buyers will need to make compromises to avoid going beyond their financial comfort zone.”
