The housing market has been tight in the last several years, with a shortage of homes and rising interest rates that impact mortgages. This is compounded by the overall impact of inflation.
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To top it off, a recent study by BMO Financial Group (BMO) reported a growing number of millennials (34%) and Gen Z (34%) are likely to tap their 401(k) accounts to buy a home.
3 Causes of Home-Buying Anxiety
It might be easy to conclude that millennials and Gen Z are simply impatient or want too much too soon, but there is certainly more to it. Tight housing inventory, high interest rates and inflation all come into play in a disheartening scenario for these younger adults.
Nearly three-fourths (71%) of Americans are waiting for rates to drop before buying a home, according to BMO. For those with school-aged children or other life goals that depend upon owning a home, waiting indefinitely is not an option.
Owning a home has been an expectation and goal for Americans for generations. Among millennials and Gen Z, 73% in each group rank home ownership as “one of their most coveted goals,” according to the BMO survey.
There is no remedy for high housing costs and low inventory on the horizon, according to BMO, and 73% of potential homeowners see homeownership as unattainable.
The Best Bad Choice
For many younger millennials and Gen Z potential homebuyers, the ability to buy a home comes down to a choice between building a life they can enjoy now and saving for retirement through their 401(k). In this case, it’s more than a matter of delayed gratification because working hard and saving in the current housing and economic scenario leaves those wanting to buy a home far short of their goal. The choice is to go without home ownership and the life goals that depend on it, or find another way.
That other way for a growing number of potential homebuyers is taking money from their 401(k). It can be argued it’s not a terrible idea because a home will become an asset that can be sold later to fund their retirement, but that is a risky assumption at best. According to BMO, for those faced with the prospect of watching their aspiration of home ownership move farther and farther away despite their best efforts, tapping a 401(k) is looking better and better.
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This article originally appeared on GOBankingRates.com: Why One-Third of Americans Are Tapping 401(k) To Buy a Home
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