Saving for a home — according to some millionaire real estate moguls — should be as easy as putting down the avocado toast and tightening your purse strings.
However, new findings have revealed that the depths prospective buyers are willing to sink to just to save for a home purchase are more drastic than expected.
In a report released today by Zillow, research shows that Millennial and Generation Z homebuyers are more likely to make serious financial sacrifices in order to fund their homeownership dream compared to older generations.
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Around 71 percent of young buyers are reported to have made a financial tradeoff in order to purchase a home — a sharp increase from the 57 percent of Generation X buyers and 33 percent of Baby Boomers who have also made monetary sacrifices. According to the report, which surveyed 13,000 American households for the 2019 Zillow Group Report on Consumer Housing Trends, the majority of homebuyers — approximately 55 percent — make some sort of financial sacrifice so they can step onto the property ladder.
The first item to be slashed from the budget is entertainment, which 29 percent of Millennials and Gen Zs said they reduced spending on. This means spending less money on going to the movies, eating out and buying concert tickets. Taking on additional work and postponing or canceling vacation plans were also among the top financial sacrifices for Millennials and Gen Zs.
Of course, cutting down your intake of frappe-lattes to save money is a no-brainer. Let’s not forget that most Millennials are swamped with student loan debt, while working in a gig-oriented economy in which home prices are higher than ever. Facing all of these barriers, some future homebuyers are prepared to drastically reduce spending — or avoid spending money at all — on the essentials to meet high down payment requirements.
“That’s pretty much the study of economics: how people make decisions when they can’t have everything,” writes Kathryn Coursolle, an economist at Zillow. “But today’s tradeoffs are non-trivial and often cut into more than just the ‘nice-to-haves.’”
When it comes to healthcare, 13 percent of American Millennials and Gen Zs postponed or cancelled upcoming health services. Around 11 percent of this group also cancelled or reduced their insurance coverage. By comparison, only seven percent of Gen Xers and three percent of Baby Boomers made changes to their insurance coverage.
Despite all of these cost-saving measures, a third of younger buyers are expected to go over budget on their home purchase, according to the report. This is where the Bank of Mom and Dad tends to step in. Millennials are still more likely to receive financial support when buying a home. Almost half of younger buyers, around 47 percent, received loaned or gifted money towards their down payment from family and friends — about 33 percent of Gen Xers received similar monetary support.
As Millennials skip medical appointments in the hopes of buying their dream condo, there is an expectation that temporary sacrifice will lead to long-term gain.
“Indeed, some of those who manage to buy young are foregoing going to the doctor or paying for insurance,” writes Coursolle. “To buy young means sacrificing more, ostensibly for the ability to sacrifice less, later.”