Yes, you read the headline correctly; millennials actually buy houses. The generation famous for living in their parents’ basement and buying avocado toast instead of saving for real estate is growing up and looking for their own homes.
According to The National Association of Home Builders’ (NAHB) recent analysis of data from the Census Bureau, millennials have entered the housing market as first time home buyers in increasing numbers, and are poised to dominate the home buying market.
- Millennials are the nation’s largest demographic group at 70 million people
- 36 percent of all millennials own a home
- In 2017 they registered the largest gains in homeownership of all age groups
- 2017 saw the number of home owner household increase by 1.5 million, and the number of rental households dropped by 76,000
- Projected economic growth and rising wages are expected to boost millennial’s desire for home ownership
Why Millennials Love New Homes
Contrary to conventional wisdom, millennial home shoppers want to buy new, single-family homes in the suburbs. As millennials look forward to settling down and starting families, leaky lofts and Mom’s spare bedroom lose their appeal as attractive places to live.
Millennial home shoppers are looking for three bedroom, two bathroom homes with modern layouts, plenty of outdoor space, and multi-purposes living areas. Newly built homes offer millennials the chance to invest in home plans designed for modern living, and the chance to skip time-consuming and expensive remodeling projects.
Millennial home shoppers are not adverse to buying smaller houses, either. Unsurprisingly, the generation that grew up with social media would rather invest in a home with less square footage, but include Pinterest worthy luxurious finishes and fixtures. Buying new construction houses allows millennials to control what upgrades and high-end features end up in their homes.
Challenges to Homeownership for Millennials
Even though millennials want to invest in the American Dream of homeownership, they still face challenges shifting away from renting. As this major demographic group shops for entry-level homes, rising construction cost, limited lot sizes, and restrictive regulations have created a difficult climate for building smaller single family homes.
In addition to housing inventory issues, millennials face unique challenges on the journey to homeownership thanks to overwhelming student loan debt. According to CNBC, 29 million millennials hold a grand total of approximately $784.7 billion dollars of student loan debt.
Despite these challenges, millennials are still, “eager to buy their first homes,” according to NAHB Chairman Randy Noel. Even though millennials face challenges to homeownership and remain one of the most mobile generations, the emotional and economic benefits provided by owning a new home are still viewed as incredibly valuable.
How Builders Can Appeal to Millennials
Builders can appeal to millennial home shoppers and serve the country’s largest demographic group as they look to become homeowners in the following ways:
- Build in millennial friendly metro areas
- Expand entry level housing inventory
- Offer more townhome plan options to home shoppers
It turns out that certain metropolitan areas are better for millennial home shoppers than others, too. Some of the best metro areas for millennials, including Pittsburg, Pennsylvania, Houston, Texas, and Minneapolis, Minnesota, combine strong job markets, affordable homes for sale, and other exciting opportunities. Builders looking to sell homes to millennials should consider expanding their presence in these desirable areas.
Expanding entry level housing inventory in these desirable metros is another way builders can appeal to millennials. This generation wants to move out to the suburbs, the only thing stopping them is a lack of housing inventory they can actually afford.
If the home building environment prevents the easy creation of small, detached single-family housing, builders should consider expanding their inventory of townhomes. Millennials are increasingly looking to townhomes as an affordable way to enter the housing market as first time buyers, while still having the luxury features they want in a home.
Are you a millennial home shopper? Let us know what new home features and amenities are most important to you in the comments below.