Millennials: The New Face of Home Buying
If you thought homeownership was a fading element of the American Dream, new research suggests the desire to own one’s home is alive and well. As it turns out, the millennial generation is not just looking for hip, urban apartments, but is a growing demographic in the housing market. In fact, half of all home buyers today are under 36 years old.
Why Buy Instead of Rent?
Thanks to rising rents and low interest rates, millennials are encouraged to make the transition to homeownership. Across the U.S., median monthly mortgages are now more affordable than median rents, especially as rent costs continue to rise. Once you get past the initial financial hurdles of buying, including the down payment and closing costs, you could save a considerable sum by owning a two-bedroom condo instead of renting one. Homeownership also provides the ability to build equity, diversify your assets and even rent out rooms as a side hustle for passive income.
Consider the following habits that differentiate young buyers from previous generations when it comes to finding and purchasing homes.
Millennials Are Moving to the Suburbs
Contrary to the pop culture stereotype of millennials as urban-dwelling clubgoers, a significant number of these 20- and 30-somethings choose the suburbs over bustling city centers. 47% of millennial homeowners live in the suburbs, likely driven by more reasonable home prices. Urban homes are notoriously costly, particularly when ample square footage and added amenities are must-haves.
Compared to previous generations, millennials expect more out of their first home purchase, preferring larger houses with community amenities, like pools and gyms. To afford these luxuries, young buyers must expand their home search—but their preference for suburban homes may not be entirely financial. Out of all generations surveyed, millennials are the most community-minded: More than half consider themselves involved in their communities or immediate neighborhoods.
However, downtown is still desirable for many buyers. One-third of Generation Y homeowners live in the urban core, which is more than any other generation in history.
Renting Is Tempting
Homeownership among millennials may be perceived as less common because, compared to previous generations, today’s first-time buyers are waiting longer to make their initial home purchase. And even while they’re actively searching for a home to buy, millennials are more willing to continue renting. As home buyers get older, their preference for renting declines: Two-thirds of millennial home buyers consider renting, compared to about half of Gen X buyers, one-third of baby boomers and just 18 percent of buyers ages 65 and older.
Millennials Value Technology
It may come as no surprise that millennials take advantage of the many available online home-shopping resources, and they use more resources prior to starting their house hunt than any other generation. For instance, two out of three millennials use tools like mortgage calculators to estimate their buying power.
The majority of millennials use a combination of the internet (90 percent) and mobile devices or apps (80 percent) during their home search. One in four use more than five resources, but most use at least three.
Millennials also spend more time researching potential agents than any other age group, and they are more likely to consider multiple agents after evaluating real estate professionals based on online reviews and testimonials.
Interactions Are Thoughtful
Despite their heavy use of technology, millennials prefer live, authentic conversations. Perhaps contrary to expectations, 30 percent of young buyers prefer talking to their agent on the phone, compared to just 15 percent who would rather text, and about of quarter of millennials want to meet in person. The same pattern holds true for communication with lenders: Most millennials favor talking on the phone, compared to a quarter who prefer to meet in person. Only 10 percent want to text with their lenders.
Professional Advice Is Essential
Most millennials (70 percent) enlist the help of an agent when buying their home, albeit slightly less often than older generations. Young buyers tend to find an agent earlier in the house-hunting process, make an offer and close on a home sooner, and stay in touch with their agent past closing. And, 55 percent of millennials refer their agent to friends and family. Millennial buyers are loyal to their agents, and about a quarter of these buyers write online reviews.
Millennials differ from other generations in many ways, but their preferences for suburban living and communicating over the phone, along with their interest in receiving expert advice from an agent are consistent with home-buying habits across generations. Still, millennials are more likely than other demographics to utilize technology and display a generally flexible attitude toward renting—behaviors that could shape future housing trends.