Millennial Home Buying Trends for 2020 and Beyond
Millennial home buying trends for 2020 and beyond
We call those born between 1981 and 1997 the “Millennial generation,” and they’re already making a huge impact on the real estate and mortgage landscape. Let’s look at nine trends that define Millennial homebuying attitudes, behaviors, and characteristics:
1. Millennials make up the largest segment of first-time homebuyers
Of all first-time homebuyers, Millennials comprise 37 percent, the largest segment of any generation. They also make up 34 percent of all homebuyers - not just first-timers - these days.
Even more significant, Millennials account for 45 percent of all mortgages, which outpaces both Gen Xers (37 percent) and Baby Boomers (17 percent) for home loans.
2. They have an appetite to buy
The American Dream is alive and well with Millennials, with 85 percent interested in homeownership at some point. More than half (52 percent) of all buyers who are considering purchasing a home in the next year will be first-time buyers, and almost two-thirds (61 percent) are expected to be less than 35 years old.
Extending that trend out to the next five years, and more than two-thirds (66 percent) of all Millennials are expected to purchase a home.
3. Marrying and having children later
Millennials are in no big rush to get married and start a family, focusing on establishing their careers and readying their finances first. In fact, the average age of marriage has risen steadily over the last two decades, and birth rates for women in their twenties dropped by more than 15 percent over just the last ten years. Factor in the need to save and pay off debt before they can start a family, and the average age of first-time homebuyers has jumped to 29.
4. Student loans and other debts are keeping them from buying
Like no other generation before them, Millennials are shackled by significant levels of student loans, with 42 percent of all older Millennials now owing Sallie Mae or some other lender. In fact, the average college graduate with student loans now leaves school with nearly $33,000 in educational debt, a burden that throws off their Debt-to-Income ratio when they attempt to qualify for a home loan.
But before you start feeling sorry for Millennials because of the student loan mountain they have to climb, consider that their use of debt goes far beyond the cost of education.
Millennials are racking up credit card balances, retail accounts, and auto loans, too, as YOLO and FOMO often override their sense of financial diligence. The average person between 23 and 38 years old now owes $27,900 in non-mortgage personal debt, a trend that hasn’t attracted as many headlines but is keeping many Millennials from buying a home.
5. Buying in the suburbs, not the city
In a surprising trend, Millennial homebuyers are opting to live in the suburbs, although this may have more to do with affordability than preference. With both rents and price tags skyrocketing in most urban areas over the last decade, Millennials are forced out to the suburbs, with more than 50 percent of Millennial homebuyers now opting to buy in the suburbs instead of cities or rural areas.
6. What they want vs. reality
According to national home buyer surveys, Millennials want bigger homes with more square footage, newer homes, and upgraded amenities like open floorplans and remodeled kitchens and bathrooms.
However, the reality of their financial situation often dashes those dreams, and they have to "settle" for starter homes that need fixing up. They also purchase homes with far less square footage than the average homeowner, making concessions like buying a home with two bedrooms instead of three, buying an older fixer, etc. just to get in the market.
7. Eco homes and going Green
Like no other generation, Millennials are concerned with environmental conservation, and that includes the desire to go Green when they’re buying a home. In fact, 47 percent of Millennial homebuyers consider environmentally-friendly features like solar panels, tankless water heaters, and energy efficient appliances a top priority.
8. Tech friendly is a must
Of course, Millennials also have a great comfort level with technology, and that includes hi-tech amenities in the home. When it comes to security systems, televisions, computers, and heating and cooling systems that are “smart” and can be operated remotely by phones and tablets, 43 percent of all users are Millennials – the largest single demographic.
9. Other Millennial home buying trends
What else are Millennials looking for when it comes to buying a home? They’re definitely looking to live closer to their jobs to avoid long commutes, with 71% of Millennials influenced by the convenience to their job when picking a neighborhood. They’re also eager to live in communities with walking or jogging paths, plenty of bars, restaurants, and shopping, and solid school districts.
But Millennials are also purchasing their first property as a “stepping stone” to their dream home, with data revealing that they’ll sell their house and move every six years compared to the national average of 10 years across all other generations.
Source: National Association of Realtors, Colorado Realtors, Washington Post, Forbes, Zillow