There is much to discuss when it comes to millennials and homeownership. Why have so many millennials turned their backs on homeownership? What plays a bigger role—changing values or financial obstacles? Why are millennials now predicted to dominate the housing market?
The millennial generation (also known as Generation Y) comprises those born somewhere in the early 1980s to the mid-1990s. Although they have been slower to embrace homeownership than previous generations, as the economic recovery continues and they enter their thirties, millennials are in a better position to buy.
Keep reading to learn about why millennials are at once deterred and motivated to become homeowners, and why they will be taking over the market in 2017.
What is Preventing Millennials from Becoming Homeowners?
Today’s young people are less likely than their parents to become homeowners. A Fannie Mae report on millennial homeownership revealed that rates of homeownership continued to fall in the early housing recovery between 2012 and 2014.
However, as the millennials in the study aged through their late twenties, homeownership rates increased significantly, suggesting that buying your first home later in life may be the new normal.
While millennials certainly have a level of disinterest in becoming homeowners, it’s fair to say that finances and mobility also play a role. Young people who leave home to attend college often remain in the city, or move to another urban center after graduation to pursue job opportunities. For these “supermobile” millennials, putting their career first means delaying or forgoing homeownership.
Nevertheless, money appears to be the biggest barrier to entry for millennial homeownership. In contrast to the “supermobile” group, purchasing a home is not an option for some young people.
Will Millennials Start Buying Homes?
Despite the variety of low down payment and low-interest mortgage programs available to first-time homeowners, many of today’s college graduates are saddled with student debt, making it difficult to save up for a down payment, not to mention make monthly mortgage payments and cover other homeowner costs. What’s more, the shortage of single-family starter homes on the market right now is preventing millennials from being able to find a home that fits their budget.
But just because millennials aren’t buying homes does not mean they aren’t interested in buying. A 2016 survey found that the majority of millennials look favorably on homeownership, and nearly half of those surveyed reported that their next move would be to a home they own, likely in a smaller city. As large coastal cities such as New York City, San Francisco, and Seattle become increasingly expensive, Midwestern cities like Columbus, Ohio, and Omaha, Nebraska are becoming a bigger draw for millennials.
For the most part, millennials are waiting until they can afford to buy, and as this generation ages, they will be in a better position to take the plunge into homeownership.
What are Millennials Looking for in a Home?
Over half of prospective buyers in 2017 will be first-time homeowners, and most will be under the age of 35. But what is motivating them to buy?
In general, millennials value upward mobility and having a nicer home, in addition to the sense of privacy, security, and community engagement that comes with homeownership. In particular, young buyers are looking for:
The right location: Millennials want to live close to urban centers—but not necessarily in the urban core. The truth is, affordable housing is scarce in big cities, so while millennials may be able to afford renting in the city, they’re choosing to buy in the suburbs.
Millennials want to be close to the city for their jobs and access to amenities such as restaurants, shops, entertainment venues, schools, and health care facilities. As a result, many are moving to the “semi-suburbs,” mature neighborhoods located close to the downtown core with high walkability rankings and easy access to public transportation and bike paths. The houses in these areas are older, but they remain reasonably priced.
Small, low-maintenance homes: Millennials don’t want to be tied down with an endless list of chores and home maintenance tasks, and therefore are looking for homes that require little upkeep. Some big draws for millennial home buyers include hardwood floors (as opposed to carpet), granite countertops, and smaller outdoor living spaces. While millennial buyers do like patios and small gardens, they have little interest in landscaping and maintaining a large yard.
Multifunctional, personalized interiors: This trend is certainly not limited to millennials, but flexible, multifunctional spaces are certainly high on their wish list. Millennials are generally social and live more casually, and so are looking for open-concept spaces that make it easy to entertain friends and family.
Millennials also want the option to personalize their living space, so spare rooms are often turned into home offices and basements become at-home gyms. Meanwhile, walled-off spaces such as formal dining rooms are becoming less prevalent in new construction homes. Simply put, millennials want the option to customize their space in a way that fits their personality and their lifestyle.
Smart technology and energy efficiency: Today’s buyers like to stay connected, so it’s important that their homes have a strong mobile signal, internet service provider options, and lots of outlets and charging stations. Millennials also place value on energy-efficient technology, so programmable LED lighting, smart thermostats, and energy-efficient appliances are high on their list of demands.
The Millennial Influence
There are approximately 83 million millennials in the U.S., making them the largest living generation in the country. As the largest demographic, they have the power to influence housing trends, but to date, they have been prudent when it comes to home buying. However, as they age out of their twenties and become more financially secure, millennials are now poised to take over the housing market.
Millennials: are you planning to buy a home in the near future? Why or why not?