Millennials aren’t looking to buy homes. Or so the theory goes. Whether because of lingering effects of the Great Recession or Millennials’ preference for renting in urban areas, realtors and home-sellers haven’t been gearing their marketing to this generation.
New research from Fannie Mae and the University of Southern California debunks this long-held belief. It shows that this group is poised to have a significant impact on housing demand. So, while millennials have rented far longer than any other generation, they now make up the largest group of interested American homebuyers.
There are more than 88 million Millennials in the world. Roughly 30% of Americans are Millennials and are now the nation’s largest generation. Though not yet a state, Washington, DC has the most millennials in the country at 33% of its population, more than any state. Virginia’s Millennial+ population (aged 25-44) is its largest segment at 27%.
How Did The Market Come To Believe Millennials Weren’t Home Buyers
Traditionally, an “age-group” approach is used to determine homeownership. By comparing cumulative homeownership attainment for different groups of individuals at the same age but at other points in time, statisticians predict rates of ascent into homeownership under the prevailing economic conditions and the legacy of advancement in different financial circumstances.
First home buyers typically fall in the 25 to 34-year-old age range or the current Millennial generation.
For the past several years, the case for Millennial homeownership has reflected not only recent home-buying activity in a very healthy environment but also home-buying decisions that were made in one of the worst economic downturns in US history from 2007 to 2009.
The problem with using this model is that it casts a shadow on recent home buying by hiding rebound purchasing activity despite years of economic recovery.
A New Perspective Sheds Light on Millennial Home Buying
A cohort approach looks away from a cumulative homeownership theory to tracking increments in homeownership for a group of people (cohort) as they advance from one age group to the next. Homeownership rates for different cohorts moving through the same age range but in different economic periods can be compared, allowing insight into how young-adult home-buying has changed as the economy has changed.
The Results of Cohort Analysis
When looking at the pace of young-adult home purchases, data shows it started to increase between 2012 and 2014, with more rapid acceleration occurring through 2016. In fact, Millennial homeownership during these years grew 11%, two to four times greater than the gains registered by Gen X or Y’ers.
The conclusion: Millennial homebuyers are more enthusiastic than previously believed.
What are Millennial Homebuyers Looking for in a Home Purchase?
According to the National Association of Realtors’ 2020 Home Buyer’s and Sellers Generational Trends Report and (yes - it is a thing) Millennial Home Magazine, here’s what this generation wants in a home:
This quality doesn’t change from generation to generation and may be even more important for Millennials. Proximity to childrens’ activities to cut down on drive time will continue to motivate many homebuyers in this generation. They also want to live closer to work and things to do. While urban areas would accommodate these wants, statistics show that many millennials are less likely to live in urban areas, probably because of cost.
Multifunctional and Community Spaces
While many say the recent work from home movement has made us realize we want our separate spaces, open floor plans are still desirable among millennials. The option of closing off an area with pocket doors or floor plans with rooms that can be closed off are moving up the list of “wants.” In particular, home offices have moved up the list of must-haves for these homebuyers.
Vegetable gardens, decks for entertaining, fences to contain pets, and patios for fire pits all feed a millennial’s desire to relax and be outdoors. Low maintenance is also a key ingredient in attracting a millennial buyer, so consider smaller lawns, irrigation systems, composite decking, and using weed guards under patios if considering selling your home.
This generation is all about experiencing friends, family – connectivity. While older generations preferred formal dining rooms, we all know most guests gravitate to the kitchen during parties, so the bigger-the better for millennials.
Modern, high-functioning amenities are big buying points for millennials. Dishwashers, washers and dryers, exercise space, laundry rooms, hardwood floors (or new low-maintenance linoleum wood look floors), garage storage, and basements aren’t essential but are desirable.
Smart thermostats, camera doorbells, motion sensor lights, drawer cabinets in the kitchen, and built-in recycling are also desirable to millennials: the more tech-savvy a home, the more attractive to this generation.
Millennials and later generations are far more environmentally focused than older age groups. Energy-efficient appliances, Energy-star windows and doors, electric-based heating and cooling, even geothermal heating and cooling are favored by this generation.
One of the hottest decorating trends is house plants and their benefits to home air quality. Millennials want lots of natural light to help save electricity as well as keep these natural air purifiers thriving.
With more people working from home, the desire for natural light has increased as a means of providing a connection with nature and the outdoors.
Millennial buyers are opting for smaller homes so they can free up time for travel and spending time with friends and family. This makes multi-functional space in a house a bonus. This generation is less focused on possessions, so the need for larger homes isn’t there for them.
Style and Charm – The Reality TV Effect
A realtor in Virginia recently commented, “Millennials want almost instant HGTV-approved living.” Perhaps they grew up watching home improvement television and are drawn to the style and charm of older designs with modern amenities. Homes with character are always more attractive to any homebuyer, but updated kitchens and baths, open floor plans, crown moldings, and built-in bookcases are on millennial buyers’ checklists.
Other experts have noted that many Millennials are looking for fixer-uppers like they see on TV shows, so they can make a home what they want. These two extremes probably define this generation correctly, with everything in-between as well, but before spending money on upgrades, a talk with a realtor might be in order.
With the increased demand for homes only slowing slightly in 2021, now may be the time to look at your own home and consider what changes you could make to increase its attractiveness to the largest purchasing demographic in Virginia.
Sources: GlobeSt.com, US Census, Fannie Mae, University of Southern California, NAR, Bankrate, Insider