For generations, buying a first home a few years after college was a rite of passage. For many millennials, however, becoming a homeowner was delayed by college debt, the recession, job changes or the uncertainty of the gig economy.
In 2018, for the sixth consecutive year, millennials comprised the majority of first-time home buyers (37%) in the U.S. Increasingly, there is a bifurcation of this generation as it relates to the home-buying process, with older millennials mirroring purchasing preferences similar to those of Gen Xers and younger boomers.
Overall, millennials view their first home as a stepping stone to their ideal home. They tend to stay in their first homes for six years on average, as opposed to 10 years for the market as a whole.
Unique preferences drive millennial housing market
Millennials are putting their unique stamp on the home-buying process. A larger majority – 85% – of millennials versus older generations believe that their home purchase is a good investment.
More so than other generations, millennials seek homes that have been largely updated. For millennials in general and younger millennials in particular, the biggest impediment to home ownership is saving up for a down payment. The median student debt load for millennials is $30K, which also acts as a drag on the ability to purchase a home. Those who do qualify for a loan tend to get approved for smaller homes. In 2018, younger millennial home purchases had an average price of $177,000 and an average home size of 1600 square feet.
Open plan configurations and dual-purpose spaces and furniture options factor significantly into buying choices. Millennials often opt for homes that allow for short commutes and better overall work-life balance. Choosing homes closer to urban centers translates into smaller living spaces, and a resulting premium on homes that can adapt to different uses. Millennial buyers tend to seek out environmentally friendly and energy-efficient homes, along with natural materials and neutral color palettes.
National trends shaped by millennial home buyers
To be able to find affordable homes, some millennials are looking for jobs in Midwestern markets like Omaha, Madison and Kansas City, where prices have lagged far behind high-cost coastal markets. In addition, these markets present a far better ratio of average wage/home cost than coastal markets.
Although 50% of millennials live in the suburbs, they prefer to inhabit “surban” neighborhoods that mix urban amenities with a suburban lifestyle. Favoring walkable locations, access to fashionable shopping and dining districts, and ample access to urban parks and recreation opportunities, millennials are recolonizing urban fringe areas that had fallen into disrepair and blight during the previous generations’ flight to the suburbs.
For their first homes, millennials are increasingly turning toward “18-hour cities” that are lively for 12 hours during the day and half of the evening and nighttime. Kansas City is an example of a city that has promoted a strong live/work culture and has provided municipal incentives and density bonuses in districts that have the lifestyle amenities that appeal to millennials. The city has experienced an infusion of $5 billion in public and private funds in a five-year span that has helped it vault into the national spotlight.
Multigenerational homes are part of the equation
In order to care for aging relatives, or in some cases to combine financial forces to either provide a down payment or pay a mortgage, some millennials are turning to a multi-generational home for their first home purchase. While some consider it an investment, nearly two-thirds of those surveyed noted that caring for relatives or simply spending time with their relatives motivated their buying choice.
Children are also coming into the equation. Not content to isolate their families in distant suburbs like previous generations, millennials seek out close-in neighborhoods with good public or charter schools, where kids, playgrounds and parks all converge.
With all their demands for green living, good design and proximity to excellent schools, millennials are smart enough to realize that they need to engage the services of a broker to assist them in their home purchase. For help with your first mortgage, turn to the professionals at First Centennial Mortgage.