Millennial Buying Power: The Changing Face of Homebuyers
They may have taken longer to start buying homes, thanks to stagnant wages, ballooning student loan debt, and increasing housing and medical costs, but millennials now comprise the fastest-growing segment of homebuyers. They now account for 37% of the housing market.
Millennials are now the largest population cohort, taking over the title from baby boomers in 2019. As such, they’re an influential generation with ever-increasing buying power. Understanding the interests and demands of this borrower segment is critical for stakeholders in the mortgage and housing industries.
Millennial Homeownership Still Lags
Compared to previous generations, fewer millennials are homeowners. As of 2019, 43% of millennials owned a home, well below the national homeownership rate of 65%. This may be changing, as 82% of younger millennials and 48% of older millennials purchased their first home between July 2019 and July 2020.
Millennials Are Spending More on Homes
Although they still don’t have the homeownership rates of baby boomers and gen Xers, millennials tend to spend more on their homes. The median purchase price of homes bought by millennials was $283,000 in 2019, compared to $280,000 for baby boomers. One reason for this difference is that millennials often prefer to live in more expensive areas and are more likely to skip starter homes. Instead, they save longer to buy the homes they want.
Millennials Borrow More
Another interesting trend among millennials is their tendency to borrow more than gen Xers and baby boomers. The pandemic created opportunities for them to save money and pay off student loan and other personal debts, which increased their ability to stretch their budgets to accommodate a larger mortgage payment. A steep drop in interest rates despite rising home values also created more opportunities for them to borrow more money.
Millennials Will Spend Money on Extras
Like baby boomers and gen Xers, millennials tend to look for homes in desirable locations near schools, shopping, and entertainment. Where they differ is how much they’re willing to spend. Millennials may be more willing to spend money to create the lifestyle they want instead of saving. When they have upgraded kitchens and bathrooms or amenities like swimming pools on their wish lists, they find a way to generate the cash they need to pay for them.
Millennials Are Open to Different Housing Options
Compared to previous generations, millennials appear to be more willing to consider multi-family options, including duplexes. They can live in one side of the duplex while renting out the other. In doing so, they start real estate investing as soon as they become homeowners. This allows them to start building a portfolio sooner rather than later in a market with a short supply of single-family homes.
Millennials Are Changing the Way Real Estate Works
Nearly five million millennials turned 30 in 2021, bringing a new wave of buyers to the real estate market. They’re interested in taking advantage of low mortgage rates to buy a home and begin building equity. Some of them are leveraging remote work opportunities to buy in more affordable markets in the west and south, where they are more likely to find property that fits their budget.
Second Home Ownership Is Within Reach for Millennials
Although much of the attention continues to be focused on first-time homebuyers, there are still second homeownership opportunities for millennials. The team at OpenAiRE understands the needs and wants of millennial homebuyers in both long-term residential and short-term rental markets. Discover the difference in working with professionals who believe in effortless ownership for everyone.