Despite the common belief that millennials are not ready to purchase homes, new research suggests that they are in fact eager to become homeowners. One reason for this may be the low interest rates that are still available. Another reason may be that, despite having a lot of debt, millennials are financially secure overall.
A Bank of America survey done in 2018 says that most millennials, over 72%, think that buying a house is their top priority. The only thing that was more important to them than that was retirement, at 80%. Lower on the list were getting married and having children, at 50% and 44% respectively. For millennials, owning a home is not only a good investment, but something that is part of the American Dream.
I’m a real estate agent. What should I know about working with millennial homebuyers?
Many millennials are delaying major life milestones such as getting married and having children. They are also putting off purchasing their first home. The main reason for this is because they are trying to get their financial situation in order first. Millennials have a lot of student loan debt and many are still living at home with their parents. They are also waiting longer to get married and have children.
A study has found that almost half of young adults aged 23 to 26 rely on their families for financial support. Therefore, the median age for purchasing a home is 29, which is significantly older than prior generations.
Around four out of every five millennials are buying their first home, which is not surprising given that most of them are in their twenties. This means that it is very important for them to find a good real estate agent, since they have no experience with buying a home.
In other words, they are looking for stability in a time of chaos and uncertainty. The popular belief that millennials are flaky and noncommittal is inaccurate. Millennial home buyers are actually looking for stability in a time of chaos and uncertainty. They want to purchase a home in a safe neighborhood with a good school district and a short commute to work.
A majority of millennials are open to the idea of buying a fixer-upper and putting money into renovating it to match their vision, as opposed to buying a picture-perfect home.
Millennials overwhelmingly prefer to search for properties on their mobile phones, with 63% saying it is their preferred method. When working with millennials, it is important to find out their preferred communication method, which is most likely to be a text message or email, but phone calls may also be preferred.
Millennials are known for researching everything before making a decision – this also applies to choosing a real estate agent. Your online presence is important as the first step a millennial will take when considering you is searching for you online.
Make sure that your online reviews, web content, and social media pages show your personality as an agent. People looking to buy a home will research every home you show them, and they’re more likely to be interested in a property that has photos, videos, and a 3-D digital tour than one with just a few pictures.
Although millennials like to research a topic before they start a project, they still understand the importance of working with a knowledgeable and reliable agent. According to the 2018 Home Buyer and Seller Generational Trends Report, 90 percent of buyers aged 37 years and younger purchased their home through a real estate agent. This is primarily because first-time home buyers are unaware of the intricacies of a real estate transaction and need assistance from a real estate agent to understand the purchasing process.
Marriage is no longer as popular as it once was, especially among millennials. Many millennials are choosing not to get married, or are waiting until later in life to do so. According to a report from the Pew Research Center, it’s estimated that 25% of millennials will never get married. As a result of this, 20% of millennial homebuyers live with a partner but aren’t married. This is a much higher percentage than any other generation, where typically most homebuyers have been married before purchasing a home.
Millennials are typically more decisive than prior generations when it comes to purchasing a home. They often know exactly what they want and need in a home, and as a result, they usually take around eight weeks to make a decision on a new property. This is likely due to the fact that many millennials spend time renting or living with their parents before purchasing a home, during which they have the opportunity to figure out exactly what they are looking for in a property.
Millennials are interested in communal living spaces and working from home. They are attracted to neighborhoods with communal workspaces and lively cafes.
Co-working spaces like WeWork, Techspace, Green Desk, and Impact Hub are changing office culture by providing enjoyable and effective places to work for remote workers. If you’re selling to millennials, being near these spaces is a great selling point. Other things that millennials tend to like are areas with monthly social events, outdoor dining, and rooftop bars and lounges.
MILLENNIAL HOME BUYER STATISTICS
- 90% of millennials would buy a house sight unseen, a 10% increase from 2021.
- 1 in 6 millennials would be willing to offer $100,000 or more above asking price for their dream home.
- Nearly half of millennials (46%) expect to max out their budgets when buying a home, with one-third (33%) planning to purchase a home that costs more than the median U.S. home price of about $405,000.
- Millennials (82%) are more likely than boomers (62%) to purchase a fixer-upper, but 1 in 4 who do so regret it.
- 82% of millennials have more than $10,000 in savings — a 25% increase from last year — but one-third plan to put down less than 20% on their homes.
- 92% of millennials have some debt. Of those, 70% have more than $10,000 in debt, and 1 in 3 owe more than $50,000.
- As millennials spend less time at home, they want smaller homes — 1,700 square feet on average, compared to 2,400 square feet a year ago.
- More than half (51%) of all respondents feel stressed or anxious about homeownership, with more than 40% fearing a potential housing market crash.
- Nearly one-third of millennials (31%) plan to live in their homes for less than five years.
Nearly 85% of Millennials Aren’t Buying a Home When Planned
About half of millennials who are interested in buying a home are doing so earlier than they had originally planned, while the other half have delayed their plans to buy.
A lot of people are choosing to buy houses now even though they may be expensive and not perfect for them because they’re worried prices will only go up from here.
Over one-third of respondents said they would buy a home in the next one to two years if mortgage rates stay the same, while 24% said the same about rent prices. Some people want to get a mortgage while interest rates are low. However, not as many millennials are buying homes because rates are going back up. In 2021, 40% of respondents said they bought a home because of low interest rates. This number dropped to 33% in 2022. If mortgage rates stay the same, 33% of respondents said they would buy a home in the next one to two years. 24% said the same about rent prices.
Additionally, 37% of millennials are motivated to purchase a home due to the need to start a family, and 27% want to maintain the same standard of living as their friends who have already purchased homes.
Almost half of millennials believe that buying a home is a good investment.
Forty-three percent of millennials are worried about finding affordable homes and delaying their purchase as a result. Many of them have been priced out of the market or outbid by other buyers.
Besides altering home-buying plans, the market has prompted millennials to:
- Expand their search location (47%)
- Increase their budget (46%)
- Make sacrifices to afford homeownership (45%)
- Sell their house for a much higher price (42%)
- Decrease their desired square footage (34%)
90% of Millennials Would Buy a Home Sight Unseen
Home buyers in 2021 have less time to think about their decision than in previous years. Listed homes are selling an average of 17 days, compared to 21 days in 2020 and 38 days in 2019.
An increasing number of millennials would buy a home without touring it first, compared to boomers. This is likely due to a desire for speed.
Sight-unseen homes aren’t without risks, and millennials said they would only consider it under the right circumstances. Millennials said they could be convinced to buy a home sight unseen if:
- The home was listed at a great price point (56%)
- The home was a new build with no previous owners (56%)
- The seller offered concessions such as paying for closing costs, waiving inspection fees, or offering repair credits (49%)
- There was high competition from other buyers (48%)
- They could lock in low interest rates (43%)
- They were unable or unwilling to travel (31%)
- They disliked their current living space (24%)
While it’s not the ideal situation, you can buy a home without touring it in person. Technology has made this possible. Of those who would buy a home sight unseen, 71% said they’d need to see a live or pre-recorded virtual tour before making an offer.
The majority of home buyers would want to view photos before making an offer, with 1 in 25 saying they’d consider buying a home after seeing only online images.
Nearly one third of millennials are willing to take risks by living in their next home for less than five years, despite financial experts’ advice that home values usually take at least that long to appreciate enough to cover closing expenses.
Although closing costs can be expensive, in a hot housing market values increase at a rapid pace and can exceed the closing costs in as little as five years. This option would make financial sense and be appealing to millennials who had to make sacrifices on their home choice because of budget limitations or competition.
Although a majority of millennials don’t plan on staying in their next home for more than 20 years, there is still a significant portion of them that do plan on staying for a longer period of time. This means that any risky decisions they make regarding their home could end up being very costly.
Millennials Want Smaller, Cheaper Houses as They Spend Less Time at Home
As prices for housing continue to increase, millennials are looking for smaller and more affordable homes. The competition in the housing market is making it difficult for millennials to find affordable homes.
The average millennial is now looking for a home that is only 1,700 square feet, which is significantly less than the 2,400 square feet that was desired last year.
The reason that millennials last year wanted more space in their homes is probably because they were spending more time at home due to shelter-in-place and social distancing ordinances. However, now that restrictions from the pandemic are easing and more people are getting vaccinated against COVID-19, millennials are spending less time at home and don’t need as much space.
The dimensions that millennials wanted in a home before the pandemic broke out in 2020 are similar to the dimensions they want now.