Millennials are not sitting out the market. The generation once joked about basement living and avocado toast is forming households and buying homes.
Why it matters: Millennials are the largest generation, and their choices drive demand for new construction, where they can get the layouts, energy efficiency, and finishes they want without a remodel.
Quick facts:
Millennials total about 74 million people, the largest U.S. demographic.
55 percent of millennials own a home.
Millennials have overtaken baby boomers and become the largest group of home buyers at 38%.
Why millennials like new homes
Many millennial buyers want new single family homes in the suburbs. As they plan for marriage, kids, and more stability, downtown lofts and spare bedrooms at a parent’s house lose appeal.
They tend to shop for three bedroom, two bathroom homes with modern, open layouts, outdoor space, and flexible rooms that can serve as an office, nursery, or workout area.
They are also comfortable with smaller footprints if they can prioritize quality. The social media generation often prefers a right sized home with high end finishes and fixtures. New construction lets them choose the features and upgrades from the start.
Headwinds for first time buyers
Entry into homeownership is not easy. Rising construction costs, limited lot supply, and local regulations have constrained the supply of smaller single family homes that entry level buyers need.
Student debt is another hurdle. Currently about 29.6 million millennials hold roughly 1.1 trillion dollars in student loans.
Even with those challenges, “millennials are still eager to buy their first homes,” according to NAHB Chairman Randy Noel. The financial and emotional benefits of ownership remain compelling for this highly mobile generation.
How builders can win with millennials
Build in millennial friendly metro areas.
Expand entry level inventory.
Offer more townhome options.
Some metros check the right boxes for millennial buyers. Places like Pittsburgh, Pennsylvania, Houston, Texas, and Minneapolis, Minnesota combine stronger job markets, more attainable prices, and a good mix of lifestyle amenities. Builders who want millennial demand should consider expanding in these areas.
Adding more attainable entry level product is key. A lot of millennials want convenience, experiences, and social engagement, but a shortage of listings in their price range holds them back.
If smaller detached homes are difficult to deliver, townhomes can fill the gap. More buyers are turning to townhomes as a practical way to enter the market while still getting the finishes they want.
The bottom line
Millennials are set to power the next leg of new home demand. They are reaching peak family formation years, shifting demand toward suburban new construction with flexible layouts and energy savings.
To learn more about housing market trends, sign up for the NewHomeSource newsletter.
Sanda Brown
After graduating in 2016 from The University of Texas with a degree in English, Sanda Brown became a content writer for the BDX with a focus on website copy and content marketing. At the BDX, Sanda helps write and edit articles on NewHomeSource.com, writes website copy for builders, and manages a team of freelancers that work on additional content needs.