By Ade Labinjo, co-founder & CEO of Breezeful.
Millennials are ending their leases, moving out and buying houses in larger numbers. In fact, they make up the fastest-growing segment of buyers today, according to a recent National Association of Realtors report. Particularly, those in their late 20s to early 30s are pushing this segment along the most. A Pew Research study found that household income rates of this bunch were two to four times higher than that of other age groups.
Millennials are having an impact on the market, and it’s not just buyers. A Zillow study found that about half of all buyers are under the age of 36 and about half of the sellers are under 41. The movement in the market by millennials is likely due to growth in their careers, higher income and paying off student loans and other personal debts.
Over the past year specifically, recent changes to the economy due to Covid-19, rebounding of employment figures and a steep drop in interest rates have all converged to create a perfect storm for personal growth opportunities like buying a home. Many were surprised that they could stretch their budgets a bit and afford a better home due to low-interest rates, especially when paired with savings from pandemic sheltering.
Millennials are changing the home buying process.
Millennial homebuyers are waiting longer to buy a first home than previous generations. Due to the effects of the Great Recession and rising student debt, millennials have been slower to buy their first homes than older generations. Many choose to move back in with their parents and tend to stay longer than ever before. According to this Pew Research study, 52% of adults aged 18-34 are now living with their parents due to economic factors and the Covid-19 pandemic. Those are numbers not seen since the Great Depression.
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This delay in homebuying could also be due to starting families later than ever. According to this Pew research study, just 46% of millennials are married, compared to 83% of the Silent Generation that was married at their age. This dip in marriage rates reflects a larger societal shift, as the same study found that percentages dropped for successive generations — 67% of early Boomers, and 57% of Gen Xers.
Millennials are changing the game with technology.
Technology has become crucial to the home buying process. Utilizing the internet and mobile devices to find, view and buy homes has become the norm among millennials. According to a 2017 report by the National Association of Realtors, 99% of millennials used the internet to get information about the home buying market. This might seem obvious, but this figure is nearly double that of Baby Boomers using the internet to browse homes.
Online mortgages are the new norm.
In the past, those looking to buy a home would head to a bank or ask a realtor or their parents to learn about mortgage options. Today, the younger generation turns to the internet to shop around for a mortgage. The things this generation loves about the internet are also true of the online mortgage industry. They love simple user experiences, quick digital communication and on-demand service for when they’re ready to buy. It’s no wonder why six out of the top 10 lenders were non-banks as of 2017.
Millennials love options.
The internet has democratized information and, as a result, armed shoppers with data to make smarter buying decisions. This extends to mortgages, too. As of 2016, 86% of homebuyers ages 18 to 34 shopped around for a mortgage compared to 55% of the 55 and older crowd.
On average, millennials obtained six mortgage quotes, compared to three quotes for Baby Boomers, extending the length of the overall home buying process. Access to options via the internet, lack of supply and difficulties saving all contribute to this longer buying window.
Millennials are changing the way real estate agents do their jobs.
In the past, realtors’ value came from providing important information about homes. Now that this information is available at the click of a button, realtors’ value now comes in the form of negotiation skills, valuable relationships and their ability to facilitate the home buying process in a fast-paced, digital world.
Technology has also enabled millennials’ preference for text-based communication with realtors to schedule appointments and ask questions about houses. Simple photos often don’t cut it either as requests for video tours and live streams are now common.
Millennials are choosing the suburbs over the city.
Millennials are moving out of the city in larger numbers. A recent Zillow study shows that 47% of Millennial homeowners live in the suburbs, as opposed to urban and rural areas. The preference for bigger, more updated houses could be a reason for this shift.
As we’ve shown, the patience in buying and leapfrogging the starter home in search of something bigger and better is a rising trend. It appears millennials are finding better options farther out from the city. While according to the above-mentioned study, a third of millennials still live in an urban area, more than any other generation. The shift to suburban living could have interesting effects on the rising costs of urban living.
Millennials are changing things.
Although it’s taking them longer than their elders, millennials are buying homes in droves. Their preference for technology has changed both the way people shop for homes and mortgages and the job of the realtor. This shift could lead to a more streamlined home buying process altogether. Millennials’ patience and preference for larger, updated homes have likely led to an increase in suburban movement.
This shift will have interesting impacts on the cost of city living going forward. It will be interesting to see if the increase in diversity among homebuyers will continue or stagnate going forward. Overall, millennials are approaching and treating the homebuying process in an entirely new, modern way, which could have implications across the economy in the future.