With the residential real estate market remaining competitive and for-sale inventory still in short supply, younger home shoppers may be viewing auctions as viable alternative pathways to homeownership, according to new data from ServiceLink.
The fintech’s newly released survey revealed that more than three in five consumers (62%) are open to buying a home at auction — and this share rises as respondents get younger. Seventy-five percent of millennials in ServiceLink’s survey reported they would consider purchasing a home at auction, compared to 65% of Gen Xers and 54% of baby boomers.
In fact, while ServiceLink’s data indicated that 10% of U.S. consumers have bought a home at auction, this share more than doubles to 21% when narrowing the focus to only millennials. Moreover, 13% of Gen Z consumers have bought a home at auction, suggesting that the youngest generation of house hunters also is open to the process, compared to 6% of Gen X and 4% of boomers.
ServiceLink’s reports comes as more homes are anticipated to hit the auction block in the coming months. While industry observers believe that a foreclosure wave is unlikely, the expiration of the federal foreclosure moratorium is nonetheless expected to result in some level of distress. Per ServiceLink, 39% of consumers believe that there will be an increase in foreclosed homes available at auction next year. Meanwhile, still-surging prices continue to push many first-time home seekers out of the traditional purchase market, and the rise of investors armed with all-cash offers has recent surfaced as another potential hindrance to homeownership.
“It’s not surprising that millennials are pursuing new opportunities to achieve homeownership, particularly in the current real estate market where they are facing challenges due to high prices and low supply,” said Miriam Moore, president of default services at ServiceLink. “We expect that more auction properties will hit the market next year through foreclosure, and buying homes at auction will become more mainstream as consumers look to buy quickly and at competitive pricing.”
Despite the openness of younger generations to buy homes at auction, a greater opportunity for awareness exists. More than one in four consumers (28%) don’t know that homes can be purchased at auction. Of the respondents who would consider buying via auction, 70% cite potential savings as a motivating factor for doing so, with 57% pointing to a faster homebuying process as a reason for their consideration.
Convenience also is a big draw. Forty-two percent of consumers said that the ability to bid online would motivate them to buy a home at auction, with this share rising to 55% for millennials.
The disadvantages of buying at auction, however, weigh heavily on ServiceLink’s survey respondents. For example, 66% of consumers say that not being able to see the home in person before bidding would stop them from buying a home at auction, while 62% cite not being able to get a professional inspection as another trepidation.