For millennial homebuyers, the city life isn’t what it used to be. According to the latest National Association of Realtors study, a growing share of millennials are moving away from paying higher urban rent and instead choosing to purchase single-family homes in suburban areas.
The study, 2016 Home buyer and Seller Generational Trends, reveals that millennials buying a home in urban areas decreased to 17 percent in 2015 from 21 percent a year ago, with 10 percent of them purchasing a multi-family home in 2015. The survey also shows that 35 percent of homebuyers in 2015 were millennials, up from 32 percent in 2014.
“The median age of a millennial homebuyer is 30 years, which typically is the time in life where one settles down to marry and raise a family,” said NAR Chief Economist Lawrence Yun. “Even if an urban setting is where they’d like to buy their first home, the need for more space at an affordable price is for the most part pushing their search further out.”
The survey underlines the challenges many millennials face regarding their ability to purchase a home, including saving for a down payment. Of those surveyed, 53 percent cited student debt as reasoning for delayed savings, while Generation Xers and younger baby boomers cited credit card debt.
“One of the many reasons housing supply has been subdued in recent years may be because a segment of homeowners have decided to delay trading up or moving down in order to pay down their debt, including from student loans,” said Yun.
The recent survey also shows that first-time homebuyers made up 32 percent of all homebuyers in 2015, with 67 percent of buyers being 35 years old and younger. Some 83 percent of all homes purchased in 2015 were detached single-family homes.
“Furthermore, limited inventory in millennials’ price range, minimal entry level condo construction and affordability pressures make buying in the city extremely difficult for most young households,” said Yun.
Millennial homebuyers 101
Born between 1981 and 1997, millennials are the most racially diverse (44.2 percent belong to a minority race or ethnic group) and educated generation (61 percent attended college). Their influence is beginning to greatly impact and shape the residential real estate market, including changing the way we buy homes.
Approximately 68 percent of millennials are first-time homebuyers with a median age of 29 years old and median income of $76,000. The typical median home purchased is a 1,720-SQ. FT. home for $189,000.
When it comes to choosing a real estate agent, millennials look for traditional characteristics. According to Visual Capital, millennials look for three traits in a real estate agent: honesty, trustworthiness and reputation. When it comes to buying a house, roughly 75 percent are looking for a single-family detached home, while 11 percent are seeking a townhome, four percent a multi-family unit, and three percent are looking for a manufactured home.
So far in 2016, the top housing markets in need of residential redevelopment are closely related to the trends of millennial homebuyers. While the majority of homebuyers in all generations continue to purchase single-family homes in suburban areas, it appears that the younger the buyer, the older the home they purchase.
Is this true for you? What are you looking for in your first home?