Millennial first-time homebuyers are changing real estate
Over the last ten years, there has been a definitive shift in the real estate market driven largely by the millennial generation
Over the last ten years, there has been a definitive shift in the real estate market driven largely by the millennial generation.
This consumer segment, often defined by their “access over ownership” mentality, has different priorities and spending habits than previous generations.
Millennials are now entering peak homebuying years, leaning into commitment and revolutionizing the home buying experience along the way.
Until 2015, millennials accounted for a small portion of all homeowners. Earlier this year, millennials were forecasted to make up over 51% of home buyers nationally, outnumbering the total share of homes purchased by Gen X (32%) and Baby Boomers (17%). Many were speculating the COVID 19 pandemic would derail Millennial home buying plans, however results from a recent survey indicate the COVID 19 pandemic has actually accelerated their home buying timeline.
Millennials’ early hesitation towards homeownership and subsequent pivot has been attributed to student debt, lower incomes and lack of affordability.
So HOW are millennials changing real estate?
A Tech-First Approach
As early-adopters, millennials are tech natives and crave instant information and communication. It is no surprise that the generation that invented “swipe right” has embraced tech in the homebuying process.
According to a recent NAR Home Buyer and Seller Generational Trends Report, 98% of older millennials searched online during their home search highlighting the increasing importance of tech in the current real estate market. Other reports also indicate that millennials are spending more time researching properties online, looking at images and listing videos, and are being more discerning in the homes they decide to tour in person.
Responding to this trend, brokerages are creating digital platforms and experiences for homebuyers to search for their next property. Companies such as Homie offers a home search experience in a real estate app and website, empowering home buyers to search, view, schedule tours and, when the time is right, connect to a dedicated local agent to access one-on-one, personalized support.
It’s all about lifestyle A recent report from Zillow highlights that an increasing number of millennials are buying in the suburbs rather than in big cities or more rural areas. They’re seeking an urban lifestyle with proximity to culturally-fulfilling town centers, restaurants, nightlife, and easy access to a variety of transportation options.
While proximity to a metro area and space are important to millennials, so is the desire to find a home that is conducive to their physical and mental well-being. Eco-friendly materials, areas to workout and meditate, and open-plan living spaces to entertain friends at home represent an extension of their lifestyle and values and often appear on millennials’ home buying “wish lists”.
The COVID-19 pandemic has had a significant impact on the idea of “home.” For many millennials, their home has become the office, gym and school. With millennials working remotely for the first time—and for the foreseeable future—finding a comfortable home is vital.
They Value Transparency
Having spent their formative years living through major world events such as the rise of WikiLeaks, environmental destruction, and questionable political transparency, millennials are inherently (and understandably) skeptical about the world around them. Studies show that as a consumer group they’re more likely than previous generations to research exhaustively before committing to large purchases, and value transparency and social impact when establishing loyalty to brands.
Fraught with what many could argue are deceiving practices and commission structures, it is no wonder millennials are now taking issue with many aspects of the real estate industry as they shift—en masse—from renting to homeownership.
A recent survey of 1,000 millennial Americans found that 42% believed it was free to use a buyer’s agent when purchasing a home and several studies indicate many millennials don’t realize that commissions are negotiable. As these realizations filter through to the new generation of home buyers, it is becoming increasingly evident that delivering on transparency is a key factor in winning the trust of the millennial real estate client.
They’re buying without a 20% down payment
For a generation already affected by record-high student loans and rising costs of living, the “ideal” down payment of 20% is increasingly unattainable. Reports show that Millennials are entering into homeownership with significantly lower down payments. The 2020 Home Buyers and Sellers Generational Trends Report shows that the median down payment for younger millennials is currently 8%.
The ever-informed millennial segment is finding ways to enter the housing game without a significant amount of cash to put down. While previous generations were weary of buying a home without a 20% deposit, savvy millennials are utilizing various tactics to ensure they are not financially disadvantaged long-term including leveraging the success of the real estate market to bring their home loans into a better loan-to-value ratio to reduce their PMI and working with mortgage brokers that guarantee they’ll beat a competitor’s locked-in estimate. Information is crucial to getting the best deal and millennials know where to find it.
Millennials are making moves, and reshaping the housing market in new and interesting ways. Many companies with a stake in the real estate ecosystem are pivoting, realizing they may miss out on the purchasing power of an entire generation if they fail to adapt. The good news for all generations is that this “millennial revolution” is reshaping the real estate industry in a positive way, and it is evolving into a more consumer centric model than ever before.
Melissa Millan is a millennial and the General Manager of Homie Colorado, a real estate company changing the way real estate is bought and sold by eliminating high fees and commissions. To learn more, visit www.homie.com/Colorado.