Every few months, a new high-profile news piece will declare a startling statistic about Millenials and homebuying. The message often repeats itself. “They can’t afford to own a home.” “They only want to live in the city.” “They don’t like the idea of being tied down by a mortgage.”
In fact, Millennials were the largest group of homebuyers in 2017—for the fourth year in a row. While real estate analysts are busy guessing the motivations of this dynamic group, more Millennials are becoming homeowners with every passing year. So, what is fact and what is fiction in the narrative surrounding Millennials and home buying?
Millennial Myths
First, let’s take a look at two of the most common myths about this group that simply aren’t matching analysts' expectations:
Myth #1: Millennials aren’t interested in buying homes.
For a while, experts thought Millennials would completely avoid homeownership, opting instead for the flexibility and low financial commitment of renting. Although research indicates that Millennials are delaying homeownership more than earlier generations, the group is generally very interested in buying. They see home ownership as a wise investment—particularly as rental prices continue to rise.
Myth #2: Millennial households are increasingly non-traditional.
Do Millennials aspire to the traditional goal of a spouse, a home, and 2.5 kids? Or are they abandoning the ideas of putting down roots, getting married, and raising children? Although in previous years, experts believed this younger generation was shying away from checking these boxes, it’s becoming clear that these achievements still count as life goals for many; they’re just happening later in life.
For instance, take the number of Millennials living with their parents. Trulia found the percentage of “boomerang kids” had peaked at 36.2 percent in 2012, and has steadily declined ever since. As the economy recovered from the recession, Millennials have gradually gained more opportunities, found jobs, and set out on their own. While many have delayed getting married and having kids, research indicates that these milestones are a part of most older Millennials’ five-year plans.
A Few Hard Truths
Although the myths above can easily be debunked, there’s no denying that Millennials face a variety of challenges that simply were not a factor inr their parents’ and grandparents’ generations.These are a few of the obstacles prompting many Millennials to delay buying a home while giving top priority to affordability:
Hard Truth #1: Millennials have more student debt than any other generation.
Higher education costs more today than ever before, so Millennials’ debt levels are growing. Today, the typical graduate of a four-year college carries about $24,600 in student loan debt—which can make it hard to save money for a home, get approved for a loan, and secure a good interest rate.
Hard Truth #2: Many struggle to save for a down payment.
Research by Freddie Mac found that 50 percent of renters, who plan to continue renting over the next three years, said their choice was driven by the fact that they couldn’t afford a down payment on a home. This is particularly true for Millennials, who carry significant student debt and are more likely to be underemployed than previous generations .
Hard Truth #3: Their priorities are gradually shifting.
Research indicates that many Millennials are more likely than their parents to seek out homes that offer eco-friendly, energy-efficient, and high-tech features, such as solar panels and smart-home systems. They also gravitate toward more urban, walkable neighborhoods that offer easy access to restaurants, shopping, and entertainment. These priorities can create challenges for Millennials to find what they want in a home or a neighborhood without going over budget.
However, it’s important to note that these new demands such as "green” technology and walkable neighborhoods aren’t only true for Millennials; a growing number of homebuyers, across all generations, want these features. As consumers' demands shift, savvy homebuilders will be able to meet their customers’ needs, whether they are Baby Boomers, Millennials, or a generation somewhere in between.
While Millennials face a variety of challenges, such as growing student loan debt and a tough job market, the vast majority are showing a strong interest in homeownership. They may delay buying a home until a bit later in life—for many, until their early or mid-30s—but Millennials still view homeownership as a smart investment and a step toward the classic American dream.
