The Real Deal New York

The “alarming” way 1 in 3 millennials are financing their homes

Say goodbye to those retirement savings
July 29, 2018 01:21PM

(Credit: Pixabay, U.S. Air Force graphic/Staff Sgt. Daniel Phelps)

About one third of millennials who buy homes are withdrawing from their retirement savings–or borrowing against it–to cobble together a down payment.

The finding comes from a survey conducted by Bank of the West of 600 millennials, aged 21 to 34, as cited by CNBC. For those surveyed who hadn’t yet taken the plunge into home ownership but were planning to, one in five are planning to use their retirement savings. Bank of the West’s retail head Ryan Bailey called it an “alarming” result.

“Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face,” he told CNBC. About 98 percent of the millennials surveyed want to buy homes.

Going into retirement funds may be masking an even bigger underlying issue, according to some financial advisers.

“If someone is contemplating dipping into retirement savings, they likely they haven’t been able to save up the required down payment to buy the house in the first place, which likely means they don’t have a good handle on their finances to begin with,” as adviser Stephen Jordan put it to CNBC.

Another explanation could be their prior debt load: a National Association of Realtors report from last year found that 83 percent of the generation who wanted to purchase homes said student debt was holding them back.

A Bankrate survey recently found that only 22 percent of millennials view real estate as a preferred investment. [CNBC]