A couple years ago, millennials surpassed baby boomers to become the largest living generation. Now that this generation is solidly in their 20s and 30s, they have become a major influence in many markets, including real estate, as they now also represent the largest share of home buyers. The National Association of Realtors compiled a report that outlines the trends that are impacting the industry and the housing market as a whole.
Millennial Home Buying Trends
According to the report, there are a few trends emerging as millennials exert their influence over the real estate market.
The vast majority (85%) of millennials consider a home purchase to be a good financial investment. Although this generation is still contending with student loan debt, they are nevertheless able to save for a down payment in order to become homeowners.
Student loan, credit card, and car loan debt are likely three main reasons 50% of millennials consider affordability to be one of the most important factors when purchasing a home. As the youngest generation, millennials also had to make the most sacrifices in order to purchase a home, primarily by cutting spending on luxury or non-essential items, entertainment, and clothing.
Location, location, location
The only factor that was cited as more important than affordability was convenience to a job. Growing families and low housing inventory are also influencing where millennials choose to buy, with three trends dominating in this generation:
- The number of millennials purchasing in urban areas is on the decline, as they gravitate toward pedestrian-friendly “surban” - a mix of urban & suburban living - areas that offer good schools, outdoor spaces, and convenient shopping areas.
- Cities that stay active into the evening, also known as 18-hour cities, are on the rise and attractive to millennials who want the benefits of mixed-use areas that offer easy access to both work and entertainment. In the Pacific Northwest, both Portland and Seattle were on the World Economic Forum’s list of the best 18-hour cities because of low unemployment rates and affordable housing options.
- Low unemployment rates and relatively low house prices have given millennials a chance to become homeowners.
Finding the right mix of cost, convenience, and lifestyle is clearly important to millennials as they decide where to buy their first homes.
The most significant environmental consideration for home buyers is not surprisingly linked to finances, with 84% of them citing the cost of heating and cooling as important. Newer homes that are more energy efficient are more attractive, especially if the savings allow buyers to secure a higher purchase price. Some of the other energy-efficient features that buyers are prioritizing include appliances, lighting, community features, and landscaping.
For millennials, the most important environmental consideration was commuting, which eclipsed heating and cooling costs. This reinforces the importance of location to this generation, as both convenience and environmental impact play a role in their purchasing decisions.
Out with the old, in with the new
Although only 11% of millennial home buyers purchased brand new homes, their reasons are compelling. The majority of them (34%) chose to invest in a new home to avoid doing renovations or encountering problems with plumbing or electricity. Another strong reason (30%) for avoiding the purchase of an existing home was having the ability to customize the design and select other home features.
All of these trends combined point to new communities outside of larger cities that offer millennials the convenience of being close to work, amenities that are close to home, and affordability. New communities also offer the opportunity for buyers to customize floor plans and choose the energy-efficient features that matter most to them.
If any of these trends ring true with you, contact your local Adair Homes office to discuss building a new custom home in the neighborhood that works best for your family. We’ll work with you to determine your budget and can even help you secure financing and find land.