Millennials had the housing market uncertain for a while, as they weren’t as quick to purchase homes and start families as their parents’ generation. The millennial viewpoint has largely been to rent because it allows for flexibility to put off having a family and focus on working. With apps and social media, millennials have been able to communicate and interact with one another like no other generation, making them feel more independent and connected to the world at the same time.
However, as the economy improves, mortgage rates remain low and the cost of rent continues to rise, millennials are taking strides to enter the housing market. While this is a wonderful opportunity for them, as well as the market, it is clear they are bringing their own interests and trends along with them. Additionally, these trends and tendencies can’t be ignored, as millennials are also bringing the sheer numbers with them too.
“Millennials are taking strides into the housing market.”
In 2014, millennials made up the largest percentage of homebuyers, according to the 2015 National Association of Realtors and Seller Generational Trends study. The study revealed that the average age of the millennial homebuyer last year was 29 and he or she had an average income of $76,000. Also, a large percentage of millennials were likely to purchase with an unmarried partner, which demonstrates that they don’t consider having a family as the biggest reason for purchasing a house. Instead, the move to build equity in a booming economy and avoid increasing rental costs are at the forefront of millennial thinking.
Increasing rental costs
Renting has been the standard of living for the majority of millennials in recent years, which has caused monthly costs to continuously rise. In fact, Bloomberg highlighted that average rental costs have increased every quarter since 2010, as landlords feel they have more leverage with their asking demands. And this increase has caused millennials to ask the question, “If I am paying this amount every month, shouldn’t I be building equity?”
According to the Zillow Housing Confidence Index released in March, about 5.2 million renters stated intentions to purchase a home this year. Many of these renters are millennials. However, this still brings into question the cost of a down payment. Can millennials afford one? Well, judging by the number of millennials entering the market last year, and the intention that many have about purchasing homes this year, it seems that millennials are taking advantage of low mortgage rates and are successfully purchasing homes.
But as the millennial generation is unique in its demands, how is the market responding? The answer is that adjusting to millennial intentions is exactly what the market is doing.
Millennials purchasing homes they want
Unlike their parents, millennials aren’t in a hurry to make the move to suburban areas. This younger generation of first-time homebuyers has been renting in urban areas near all the amenities they want, such as work, bars and coffee shops. To many millennials, this environment has been home since graduation, and they plan to keep it this way. Because of that, they are purchasing homes in urban areas, as noted by MarketWatch.
Likewise, as millennials are putting off having families, they are more interested in smaller homes that provide more flexibility. They want homes that utilize modern technology, such as energy-efficient appliances. While much of this reasoning is to break free of the formality of the older generations and make the space their own, they also are concerned about high utility costs and paying for what they don’t need. Since millennials have been focusing on rent for so long, they are conscientious about necessities, and purchasing smaller homes in urban areas to meet these necessities.
And when it comes to green technologies and modern amenities, millennials are willing to pay more. In fact, The Boston Globe noted 57 percent of millennial homebuyers said modern technology is a good investment in their home, and that they feel it makes the home safer and more enjoyable. Additionally, these technologies are not being limited to one area of the home, such as the kitchen or entertainment room. Millennials want to see updated technology in the garage, laundry room and master bedroom as well. Therefore, new construction is incorporating these trends to cater to the growing generation of home purchasers.
There has been a long-running assumption that millennials don’t want to purchase homes, but this is just not the case. Millennials want to buy homes, they just want to do it their own way. The market has recognized these trends and is adapting to the millennial buyer. And as rent costs keep climbing and more millennials turn to home purchasing, the market is going to continue to grow.