Debt, Smaller Down Payments Leave Millennials Vulnerable to Already Challenging Market

Real Estate In-Depth | April 4, 2018

SANTA CLARA, CA—Rising interest rates and home prices will cause a resounding majority of millennials to modify their home search, perhaps prompting them to seek a smaller or less expensive home or even consider different neighborhoods, according to a survey released on April 4 by

Two factors are contributing to market sensitivity from millennials—their likelihood to carry more student loan and other debt and the fact that this demographic puts less down than other buyers.

According to the online survey of more than 1,000 active buyers conducted in March by Toluna Research, 79% and 83% of respondents of all ages, respectively, said rising interest rates and home prices will impact their home search. That rises to 92% and 93% for buyers aged 18 to 34 years old. Only 17% and 21% of all buyers indicated prices and rates would have no impact.

“Existing debt and lower down payments leave younger shoppers more exposed than others to the impact of rising mortgage rates and record-high home prices,” said Danielle Hale, chief economist for “These obstacles won’t prevent millennials from finding and buying homes, but most will have to adapt to these challenging market conditions by adjusting their home search.”

Rising Prices, Interest Rates Impact the Majority of Buyers

When asked how their search would be impacted by rising prices, 41% indicated they have to buy a smaller home, 35% need to look for a less expensive home, 34% have to look in a different neighborhood, 33% need to put down a larger down payment and 31% have to increase their monthly mortgage budget.

Survey data also shows rising rates have a greater impact on millennials than on buyers 55 years or older. As a result of rising rates, 37% of millennials said that they have to look for a less expensive home, compared to 24% of buyers 55 and older. Thirty-five percent of millennials have to look in a different neighborhood, compared to 18% of those 55 and older. Thirty-three percent of millennials have to look for a smaller home, compared to 23% of boomers.

Millennial Buyers Carry More Debt than Others

Millennial buyers are also more likely to report carrying each of the seven categories of debt inquired about—often by a significant margin. Of those between the ages of 18 and 34 years old, 78% have credit card debt, 68% have a car loan, 62% have a personal loan, 62% have mortgage debt, 57% have home equity loans and 61% have student loans.

This is notably higher than 35-54 years old who reported: 72% credit card debt, 59% car loan, 55% have a personal loan, 60% mortgage debt, 49% home equity loan, and 49% student loans. Respondents 55 and older indicated: 45% credit card debt, 30% car loan, 12% personal loan, 32% mortgage debt, 11% home equity loans and 9% student loans.

Millennials Put the Least Amount Down

When all respondents were asked how much cash they were planning to put down on their purchase, 32% indicated they were putting down less than 10% of their purchase price. Seventeen percent said 16% to 20% of the price and 15% indicated 11% to 15% of the purchase price.

A down payment of less than 10% was most common for the millennial generation with 37% of buyers aged 18-34 reporting the 10% or less down payment. They were followed by 34% of 35-54 year olds and 20% of those 55 years or older. Millennials were also the least likely to put more than 20% of their purchase price down with roughly one in four among 18 to 34 year-olds putting more than 20% down, followed by one in three among 35 to 54 year-olds, and one in two among 55 and older buyers.