Millennial Home Buyer: Fact vs Fiction
I recently came across a Builder Magazine/Online study addressing '7 Potentially Deadly Myths About Gen Y (Millennials) and Housing' and found a couple of the findings especially intriguing with regards to the Starter Home 2.0 project. Below are some quotes from that article and some takeaways.
Millennials Don’t Want to Own a Home: FALSE
Mollie Carmichael, a principal at John Burns Real Estate Consulting, says the way millennials were raised is playing into their delayed decision-making. “This is a group that doesn’t have as many rules as their parents,” she says. “To get married by the time they’re 24 isn’t their goal. To have two to three children isn’t the plan, to get married first and then have children—not necessarily their rules.”
And when comparing millennials to their parents (who often are baby boomers), the interest in homeownership has been delayed, but it’s still there.
Carmichael predicts 2019 will be when the majority of the millennial generation will become most interested in buying homes.
“I’m seeing that buyer settle down at age 30 to 31 versus their parents at 24 to 26,” she explains. “As I start to look at consumer insights, I look at interest and when they want to buy. With Gen Y, that’s at 30 and older.”
The desire to own a home is completely different from having the ability to actually buy one. About 62 percent of renters from the ages of 25 to 34 indicated they will continue to live in rental housing for the next three years because they cannot afford a down payment for a mortgage, according to a recent Freddie Mac survey.
Those in the millennial generation eventually will go through the same life stages as previous generations, but it just may take them a little longer.
“It is the American dream to own a home,” Carmichael says. “People associate success with owning a home, and millennials are no different. If I’m not getting married or having children, then there is no urgency to buy a home. And until I do, the urgency isn’t there.”
Starter Home 2.0 Takeaway: With student debts, a weak job market, and less pressure to get married and have kids as early in life as their parents and grandparents, Millennials are still very much interested in owning that first starter home, but that initial purchase is happening around ages 30-31 instead of 24-26. That means starter homes are often being purchased at the time when second homes were being purchased in the previous generation, so the Millennial starter home will need to have that extra bedroom and extra bathroom needed to accommodate a growing family like the Starter Home 2.0.
Starter Home 2.0 Takeaway: With student debts, a weak job market, and less pressure to get married and have kids as early in life as their parents and grandparents, Millennials are still very much interested in owning that first starter home, but that initial purchase is happening around ages 30-31 instead of 24-26. That means starter homes are often being purchased at the time when second homes were being purchased in the previous generation, so the Millennial starter home will need to have that extra bedroom and extra bathroom needed to accommodate a growing family like the Starter Home 2.0.
Millennials Form Households In Different Ways From Past Generations: FALSE
According to the Demand Institute’s “Millennials and Their Homes” report, 34 percent of those currently unmarried plan to marry in the next five years, and 19 percent of those without children today plan to have children in the next five years. By 2018, there should be 8.3 million new households formed, a 38.4 percent increase since 2013.
The ball is already rolling in that direction. The number of millennials living with their parents peaked at 36.2 percent in 2012, according to Trulia, and has been declining slightly over the past two years. Since household formation levels are still stagnating, many millennials are possibly now in the transition period of gaining independence from their parents, but still saving money by living with other adults.
“All the adults who are living with other adults for affordability reasons will start looking to become their own household,” Olsen says.
Starter Home 2.0 Takeaway: The amount of millennials entering the home buyer market is going to increase dramatically over the next five years, which puts the Starter Home 2.0 project in a great position to satisfy a real need.
