More Millennial Homebuyers Saving for a Down Payment 'Old-Fashioned Way'
MBA NewsLink Staff
Seventy-two percent of Millennial homebuyers this year are saving for a down payment directly from their paychecks, up from 69 percent last year, according to a March survey of 2,000 U.S. homebuyers and sellers commissioned by Redfin, Seattle.
More than 500 respondents born between 1981 and 1996 responded to the survey (https://www.redfin.com/blog/how-millennial-homebuyers-save-for-down-payment/). In response to the question: "How did you accumulate the money you need for a down payment?, the first-time home buyers replied:
--Earnings from secondary job: 24% down from 36% last year.
--Cash gift from family: 18%, down from 24%
--Sold stock investments: 9%, down from 13%
--Pulled money from a retirement fund early: 7%, down from 13%
--Contributed less to retirement savings: 6%, down from 12%
--Inheritance: 6%, down from 12%
Redfin chief economist Daryl Fairweather said that millennial homebuyers are increasingly able to save money for a down payment and becoming less reliant on non-traditional funding methods likely has to do with the fact that wage growth for American workers hit a 10-year high in February after several years when wage growth fell far short of home price growth. She said the combination of strong wages and the housing market stalling late last year means that more buyers are able to save for their down payment using their primary income alone.
"Unemployment is at its lowest point since 2000," Fairweather said. "Millennials have never worked in an economy this strong before, and are now finally making enough from their paychecks to save for a home. The fact that they are less often needing to rely on family members or sacrificing retirement savings to fund a home purchase is another sign that millennials are finally gaining their financial footing."
The survey also noted compared to a year ago, the share of Millennial respondents who sold cryptocurrency to fund a down payment fell dramatically, from 10 percent last year to just 3 percent in 2019, likely due to a similarly dramatic decline in the price of the digital asset. In early 2018, Bitcoin, the most popular cryptocurrency, was trading at around $10,000 for one bitcoin. As of this past March, that had fallen to under $4,000.