In the wake of the latest recession, the housing sector all but neglected entire generations. Younger Americans, and Millennials, in particular, were essentially left on the sidelines. Factors beyond their control didn’t warrant participation. Underemployment only compounded weak wage growth and student debt problems. Of particular concern, however, was an inability to qualify for mortgages and save up a sizable down payment. The resulting economic environment made it increasingly difficult for anyone to buy a home, let alone younger generations struggling to save money. However, it would appear as if the expansion of the economy is ushering in a new age of buyers. Despite several headwinds, Millennials accounted for the largest share of homebuyers in 2014. Obstacles that once riddled the field of home buying are now a thing of the past – at least for now.
According to a report issued by the National Association of Realtors (NAR), Millennials between the ages of 18 and 34 “accounted for the largest share of homebuyers last year at 32 percent.” The median age of millennial buyers was 29, and their respective income was approximately $76,900. The average price of the homes they purchased was $189,900.
As more first-time buyers elect to participate in the market, homebuilders will adapt. Prospective buyers should expect to see a decline in the square footage of newly built homes. In fact, those keeping an eye on the market should pay close attention to the popularity of townhomes and condos, as millennials are more inclined to favor the affordability of these establishments over single-family homes. Moreover, as the amount of millennial buyers increased last year, so did the construction of new townhomes. In fact, townhouse starts increased 12 percent year-over-year. In addition to townhomes, multifamily apartments should garner the attention of first-time buyers for the same reason as townhouses. With the direction things are heading, it would not be surprising to see the entire entry-level market expand in the coming year.
However, if the entry-level market is to expand, the method in which it does so must change. What do I mean? Millennials are essentially changing the way home buying takes place. As more Millennials enter the market, the ways things are done are likely to see a change. The following highlights just a few changes that are expected to take place in the new Millennial era of home buying:
- Millennials appear to prefer keeping in touch through texts and emails, as opposed to traditional phone calls.
- Millennials are more likely to do their homework before a purchase online.
- Younger buyers want to know what to expect and when. They really don’t like surprises.
- Millennials expect top be partners in the home search.
- Millennials prefer checking apps when it comes to collecting information on a respective property.
- Millennials are more likely to research an agent’s history before committing to their services.
- Millennials want to be engaged on social media platforms.
When it really comes down to it, the economy needs to continue its expansion to support the addition of entry-level housing. Essentially, new jobs will only increase first-time buyer activity, further growing the need for entry-level housing. Fortunately, for the sake of the entire housing industry, the job sector has been preforming admirably. Recent data suggests that approximately 288,000 new jobs were created every month in the last quarter of 2014. On top of that, unemployment dropped to 5.5 percent, as of February.