Millennial homebuyers are by and large driving the housing market. According to Zillow, half of all U.S. buyers are under the age of 36.
This might come as a shock after hearing nonstop reports about young adults who are sorely underemployed, drowning in student debt and living in their parents’ basements. How on earth are they buying houses?!
For many millennials, buying a home is an emotional accomplishment, so they’re working hard to make it happen. About 43% of this generation identifies as non-white, according to a Pew Research Center analysis. This segment of the population largely believes in the American Dream, and considers homeownership an integral part of it.
As millennials (the largest living generation in the U.S., by the way) continue to enter adulthood, they will increasingly drive housing trends. It’s certainly worth understanding their financial standings, housing preferences and concerns about the homebuying process. Here are several points we’ve rounded up.
Not everyone is buying. This is where the underemployment and student loan debt reports come into play. In a 2016 TD Bank survey, 65% of millennials reported that saving enough for a down payment is delaying them from making their first home purchase. So, although millennials make up the majority of U.S. homebuyers, most millennials have yet to purchase a home.
The ‘burbs are where it’s at. Millennials are buying less and less in big cities. While 21% were purchasing in urban or central city areas last year, just 17% did so this year, according to the National Association of Realtors. It seems like the suburbs are a happy medium for young adults. These areas typically offer slower-paced lifestyles with the luxuries of a larger city (shopping, arts and culture, sports, etc.) often just a short drive or a train ride away.
How about those social networks? Some 66% of millennials utilize mobile devices to conduct their home search, Zillow published earlier this year. And of all generations, they are the most likely to ask friends, neighbors and relatives for advice .
Finding a nice home at a nice price is stressful. Redfin found in a 2016 survey that affordability is by far the largest concern for millennials during the homebuying process. Competition is their second-most pressing issue.
Mortgages are definitely still a thing. After saving enough for a down payment, 78% of millennials get a mortgage, while 22% pay cash money (Zillow).
The kids are alright. Millennial homebuyers are thinking about how any moves will affect their children. After square footage and price, the quality of nearby schools is the most important attribute they look for in a home. The quality of the home itself, design and floor plan come in close second (Redfin).
They’re not looking for fixer-uppers. Multiple studies have found that starter homes are increasingly becoming a thing of the past. Millennial homebuyers are shopping for larger homes (1,800 square feet on average, according to Zillow) than older shoppers did at that age. The vast majority—78%—prefer move-in ready homes. (TD Bank)
Detached, single-family homes are ideal. In a 2016 National Association of Homebuilders study, 68% of millennials expressed this was their preference.
Relationships made during the homebuying process are important. The majority of millennials—70%—use agents, but they do so at a lower rate than other generations. If the transaction goes well, millennial homebuyers are far more inclined than other shoppers to be loyal. A significant portion report staying in touch with their agent, recommending that source to friends and even asking them for home improvement advice in the future (Zillow).
Looking ahead …
TD Bank reports that the top three priorities for millennials before buying a house include saving for a down payment, paying off debt and having a steady job. As unemployment figures continue to decline and student loan relief programs are implemented, it’s likely that we’ll see more millennials obtain their little slice of the American dream.