Millennials are flocking to fixer-uppers because it's the only way some can afford a home

• Millennials are buying fixer-uppers amid a cutthroat housing market that's overpriced and shrinking.
• Buying old homes and renovating them has made homeownership more attainable for the generation.
• But BofA Research data reveals many are taking out loans for home improvement projects.

As prices for homes reach record-highs, millennials are turning to fixer-uppers as a more affordable solution.

More than three-quarters (82%) said in Bank of America Research's sixth annual millennial home improvement survey that they're more likely to buy a fixer-upper than a newly built home. The survey polled over 1,100 members of the generation.

It's the latest takeaway from a historic housing shortage that's forcing millennials into their second housing crisis in 12 years. Contractors have been underbuilding since the Great Recession. The US has been about 6.5 million homes short since 2000 and is facing a two-month supply of homes when it should have had about six months, Gay Cororaton, the director of housing and commercial research for the National Association of Realtors (NAR), previously told Insider.

Millennial demand has only exacerbated the shrinking inventory. It's led to cutthroat competition rife with bidding wars, as aspiring homebuyers throw down all-cash offers and higher down payments in hopes of snagging a house. Some of those unable to outbid are resorting to buying old homes and renovating them.

Consider the millennials who have been putting bids on fixer-uppers featured in Instagram account Cheap Old Houses, which highlights historic homes that cost no more than $100,000 to buy, as The New York Post's Shayne Benowitz reported back in August. These "old houses" are typically found in smaller towns that have become enticing in the age of coronavirus and remote work.

When Insider's Libertina Brandt interviewed Cheap Old Houses' founder Elizabeth Finkelstein at the start of the pandemic, the Instagram account had 750,000 followers. Today, it has 1.5 million.

Finkelstein told Benowitz the account helps make homeownership more attainable for millennials, many of whom had plenty of time on their hands during quarantine for restoration projects.

Fixer uppers aren't always cost-effective

But a fixer-upper isn't always as affordable as it seems.

One 27-year-old that Benowitz spoke with said she had paid $18,500 for a Victorian home in West Virginia, but estimates her renovation budget would total $125,000.

Half (52%) of millennials started their home improvement projects within six months of their purchase, per the BofA survey. Many have already completed smaller, more budget-friendly projects such as painting and landscaping but still have yet to complete larger projects like bathroom and kitchen remodels.

Millennials are comfortable DIYing many of their home renovations, according to the survey, particularly the 30-something cohort. They feel more at ease painting and wallpapering and upgrading appliances, compared to more complex projects like altering floor plans and roofing.

That leaves some taking out loans to complete more complex projects. For the first time in the history of the annual survey, BofA found that millennials are using loans more frequently than cash to fund projects exceeding $10,000. When BofA last conducted the survey in 2017, only 34% were using loans for home improvement. Today, 42% of respondents are.

It hasn't helped that a series of shortages, from lumber to semiconductor chips, and shipping delays are hijacking many costs involved with renovating a house such as wood and big appliances, making renovating more costly.

However much millennials try to find a more budget-friendly option, there will always be hidden costs to homeownership.