According to a survey issued by Bank of the West, 69% of millennial homebuyers experienced some form of “buyer’s remorse” over their recent home purchase.
Most said they wished they had been more prepared going into the purchase, 44% had issues with the space, location, or structure, and 41% said they felt stretched too thin financially. Overall, millennials are wondering if buying a home was a wise investment.
To new homebuyers who view their home purchase as a mistake, they should “think of it more as a surprise than a disappointment” says Rick Floyd, Executive Vice President of Homebridge Financial Services.
There are a lot of details that soon-to-be homeowners may overlook and may add to the “sticker shock” that millennials are experiencing. Still, buying a home is a major part of the American Dream and a personal goal of many.
As a 20+ year veteran in the mortgage industry, Rick Floyd has some rock-solid tips for current and future homebuyers to avoid buyer’s remorse.
For People About to Buy
Floyd says soon-to-be homebuyers should “focus on reducing their debt, saving as much money as possible and having a solid financial plan that will make it easier to succeed” which includes getting rid of any high interest debt which can negatively impact your credit score.
The key is to decrease your debt load as possible by the time you make your home purchase. This may mean waiting a little longer than you wanted to buy a home but it will be well worth it. However, waiting for your finances to stabilize is not the same as trying to “time the market”.
For Those Trying to “Time the Market”
For some, the combination of less-than-favorable financial circumstances and steadily rising home prices have encouraged them to wait for the market to cool down. This approach does market have some downsides.
“Waiting has never really worked out that well”, says Floyd. “No one has a crystal ball to see whether rates will go up or go down. Right now, interest rates are the lowest they’ve been in years. They’re unlikely to go down dramatically and will most likely increase.”
As of April 2019, interest rates are an average of 4.17% for a 30-year fixed rate mortgage with lower figures for other products. This is the lowest they have been in at least 30 years.
For people waiting for interest rates to go down, you risk the chance of a higher interest rate decrease your number of housing options later on.
If you live in an area where home prices are very high, it’s easy to believe that the home prices will decrease with time. That may not be so. “Home prices are influenced by supply and demand. If more people are migrating into an area over time, prices will also go up.” Certain areas in the West Coast are experiencing this phenomenon, meaning home prices will continue to appreciate at a brisk pace.
For people who are in great financial standing and still want to purchase a home — now is the time to buy.
For New Homeowners
Floyd encourages new homebuyers who question their purchase of a home to examine their regrets in full. “What do you regret about buying a home? Is it the location? The expense? The design? Is it costing you more money than you thought? Where do you need to make adjustments in other areas?”
There’s an adjustment period that comes with any new change, especially when the change involves the biggest purchase of your life.
However, most homebuyers will experience significant positive effects over the long run, especially as their home equity starts to build and they experience higher earnings in their careers.
For People on the Fence
A combination of low interest rates and steadily increasing housing supply makes buying a house an attractive option for financially sound people. If you’re still unsure whether a home is right for you, Floyd encourages you to consider your overall life goals.
“Where are you in life? What kind of lifestyle are you hoping for? Are you looking for a life in the countryside or something more cosmopolitan? These things will affect what type of home you buy.”
He says you should “consult with a real estate professional and a mortgage banking professional to discuss all your options and talk with them about some potential costs. Most importantly, you should get pre-approved to understand what monthly mortgage payment you can afford.”
At the end of the day, most people will be better off owning a home over the financial long-run than they would otherwise. Buying a home is like planting a seed in the ground. It may take many years for fruits of your labor to show, but with time and patience, the result is one worth waiting for.