LendingTree, the America’s largest online lending marketplace, commissioned a survey of more than 1,500 Americans to better understand their sentiments around relocating. The study revealed a significant contrast between Millennials and other generations regarding lifestyle preferences and aspirations for homeownership. Forty-five percent of homeowners have plans to move to a different home within the next decade, while some Millennials question whether homeownership is the best fit.
A major share of homeowners have a new home purchase in mind in the coming years, but some homeowners plan to go back to the days of having a landlord and fewer residential responsibilities.
The top five reasons current homeowners would buy a new house in the next 10 years are retiring to a new area (16%), moving to a larger home (14%), downsizing as empty nesters (12%), upgrading from a starter home (10%) and job relocation (10%).
Although 26% of Millennial homeowners anticipate moving to a larger home in the next 10 years, 28% of Millennial homeowners plan to return to renting sometime this decade. More than two-thirds (68%) of Baby Boomers don’t plan to ever go back to renting. LendingTree defined generations by the following age ranges: Millennials, 23 to 38; Generation X, 39 to 53; and Baby Boomers, 54 to 73.
The top reason for Baby Boomers to buy a home is retiring to a new area. “We found that 45% of homeowners have plans to move at some point within this decade,” said Tendayi Kapfidze, chief mortgage economist at LendingTree. “Some of that is aspirational,” he explained, adding that “if you look at the actual data of the number of people who move within a given year or if you were to extrapolate that over a decade, you may not get to such a high number. So this is people saying what they want to do, and then you kind of run into the reality of what you’re actually able to do.”
Kapfidze said the key is if you have set a goal to move to a different state or buy a house, start planning far in advance. About one in 10 (11%) renters plan to buy a home in 2020, and 42% of renters plan to buy within the next two to five years. Nearly 16% expect they will start the home-buying process in the next six to 10 years. Notably, one in four renters admitted they do not feel the need to own a home. Due to homeownership rates nearly doubling for Millennials once they reach their 30s, many enter a transitional period around 29 to 30 years of age and reconsider their priorities, according to real estate data provider CoreLogic.
The hidden costs associated with owning a home can add up. More than one-third of Americans can’t perform simple household maintenance tasks let alone yardwork, repairs and upkeep without searching for help on the internet, which helps explain why some first-time home buyers would rather go back to renting. This lack of home maintenance skills is especially true with Millennials, according to a survey conducted by The Harris Poll.
Kapfidze said perceptions of tasks that homeowners think they can do around the house and what they can actually do are two different stories. “One of the things that we found is a lot of first-time home buyers underestimate the kind of effort and responsibility it takes to maintain a home,” he said. “Some people maybe were not quite prepared for the responsibility of homeownership and are perhaps even regretting it a little bit.”
While homeowner mobility has been declining steadily over the past three decades, the top reason for Generation Xers and Baby Boomers to move is retiring to a new area. Still, nearly 60% of homeowners in the Silent Generation — the demographic cohort following the Greatest Generation and preceding the Baby Boomers — say there is no way they would buy a new home in the next decade, and 35% of Baby Boomers agree.
“If you look at the age group of the Silent Generation, it’s 74-plus, a lot of those folks are living in the homes that they think they are going to spend the rest of their days,” said Kapfidze. “There’s not a lot of incentive for them to move. A lot of people do modifications to their homes to make them more comfortable and easy to navigate as they age. So if you customize that home to fit your living circumstances, you probably want to stay there.”
When homeowners with moving plans were asked why they are relocating, the top three responses were to move to an area with a lower cost of living (30%), to move to an area with better job prospects (28%), and to be closer to their children (21%).
Economics and family-related reasons are key motivators for moving. “Maybe someone is moving to be closer to their children or parents or moving to an area with better schools for people who have young children and looking to move,” said Kapfidze. “The kind of motivators boil down to economic reasons, which boils down to either the cost of living or job opportunities. Retiring is kind of a mix of economic and personal reasons.”
Retirees can help their savings last longer by moving to a place with lower taxes. LendingTree has conducted studies that looked at where residents in each state are looking to move and discovered a Southern tilt in preferences of out-of-state home buyers.
“They move to sunnier, warmer climates,” said Kapfidze. “But another thing that is happening in the last two years or so as a result of the 2018 tax plan that was signed into law by President Trump is it would put a cap on the deductibility of state and local taxes. With that $10,000 cap, you’re seeing some migration from places where there are higher state and local taxes to places where there are lower state and local taxes because you no longer have the ability to write off all of the income taxes. And that’s happening more with Boomers than some of the other generations.”
The study shines a light on why some Millennials are postponing home purchasing, underscoring a clear interest in being able to pick up and go when their lease is up rather than being tied down by a mortgage.
“When you own a place, especially in a dynamic labor market as we have today with such a low unemployment rate, you miss out on some employment opportunities because you’re not as flexible,” said Kapfidze. “And for Millennials who maybe are kind of early in their career, that might be a consideration that, hey, if I go back to renting, that opens up more job opportunities for me because I become more mobile.”
And then there is the belief that renting is like throwing money away, but Kapfidze said that’s not necessarily the case.
“The reason homeownership works so well is, in a way, it’s almost like a forced-savings tool because the equity that you build in your home is not liquid so that enables your wealth,” he explained. “But there are a lot of people who if you rent and you have this discipline to actually maintain your other kinds of financial accounts and savings accounts, you can build equity that’s not real estate equity but maybe stock market equity or other types of financial instruments, and that’s another way to build wealth. It’s more about your overall financial management and how you look at your total liquid assets and liabilities and how you manage those.”