For many years the general public had solid confidence in the idea that real estate – especially owning your own home – was the best investment that an individual or family could make. The housing market crash and resulting Great Recession after 2008 put a dent in that public confidence. I last wrote on this subject in 2015, after a Gallup poll had confirmed that real estate was still considered the most reliable form of long-term investment, but down from past surveys.
The prolonged economic recovery has reassured most home owners that their investment was a wise one, if only for one simple fact: home ownership has been the largest source of individual wealth in American history. We are living in a time when retirement pension plans are in jeopardy or extinct, and retirement savings for most people is a wishful dream. Built-up equity in a principal residence remains the largest source of personal wealth most people will ever accumulate.
In a recent article in Forbes magazine, David Greene wrote, “Appreciation, or the rising of home prices over time, is how the majority of wealth is built in real estate. This is the ‘home run’ you hear of when people make a large windfall of money. While prices fluctuate, over the long run real estate values have always gone up, always, and there is no reason to think that is going to change.”
With this background, I was surprised to read an article recently from CNBC that quoted a new Bankrate.com survey. The headline was a kick in the pants: “Most millennial homeowners have buyer’s remorse, a new survey shows.” The article, by Diana Olick, reported that “Nearly two-thirds, or 63 percent, of millennial homeowners surveyed by Bankrate.com said they had regrets about buying. That is more than any other age group and nearly double the regret rate of baby boomers.”
Why is this true? The culprit appears to be social media.
There is so much information on social media – inaccurate, opinionated, or written on a national scale for an industry that is structured and regulated state-by-state – and much of it is put out there by people with a certain perspective they want to promote. This toxic soup is contradictory and confusing but leads millennials to believe that after doing their ‘research’ they are qualified to take charge of the transaction themselves.
Many realtors, myself included, have run into millennial buyers who were so confident that their reading and exploration on the internet had prepared them to purchase, that when the real estate professional hired as their fiduciary agent gave them a piece of advice that contradicted what they had found, they disregarded or devalued that professional advice. Stunningly, only 30% of these buyers visited their desired neighborhood at various times of day before buying into it.
What kind of advice were they most likely to disregard?
1) Information regarding their chosen location, particularly baffling given the information above that they hadn’t spent time in their new neighborhood and the universal real estate mantra: “location, location, location.”
2) They underestimated the expense of ongoing maintenance and didn’t budget for it. I don’t remember a transaction where this wasn’t brought up by both realtor and home inspector. I guess they just weren’t open to the information.
3) They either bought a house too small or too large for their needs and budget, given the expense of utilities and insurance. This seems to feed into a larger problem affecting the population in general, where we have not adjusted to the idea that information on social media should be treated with suspicion unless verified. Fortunately for those of us in the field, it gives us the opportunity to add a new compelling reason to use an experienced real estate professional: we know our market, we know the “rules of the road,” and we are happy to be a resource for that important verification of all the “stuff” you turn up in your online research. Use us!