The much-discussed millennials, who were born between the early 1980s and the early 2000s, will soon make up the largest living generation. According to Pew Research, millennials are on the cusp of surpassing Baby Boomers (those born after World War II) as the nation’s largest living adult generation. This is based on population projections from the U.S. Census Bureau as of 2016.
Pew notes, "Millennials numbered 71 million, and Boomers (ages 52 to 70) numbered 74 million. Millennials are expected to overtake Boomers in population in 2019 as their numbers swell to 73 million and Boomers decline to 72 million.
Needless to say, the size of this group and its financial clout are making a big impression on many industries, including and especially housing. Why? It is leading the charge on home buying. Part of the reason for this trend of "settling down" in a home involves the demographics of parenting.
About 1.3 million millennial women gave birth for the first time in 2015, according to recently released data from the National Center for Health Statistics, raising the total number of U.S. women in this generation who have become mothers to more than 16 million. In total, millennial women accounted for about eight-in-ten (82 percent) U.S. births in 2015.
These numbers are music to realtors’ and home builders' ears!
However, starting a family is only one of the reasons for this home buying trend among these younger parents. There are forces as work that can be better understood in the context of the unique traits of this generation.
Generation Me Grows Up and Brings Along Its Values
One of the first references to the millennial group came in a book entitled Generation Me, authored by psychologist Jean Twenge. The book notes that this group has confidence and tolerance but also has a sense of entitlement. As adults, millennials certainly have a strong sense of self-worth, and this is manifested in several ways:
- They insist on a work/life balance.
- Due to their exposure to computers and the internet, they are tech savvy.
- More than any other generation, they are connected to each other through social media.
- They crave authenticity in every part of their lives.
Economic Forces are Also Driving This Trend Toward Home Ownership
A recently released survey from realtor.com on rising rents and the impact on millennials sheds light on the issue.
“We know rents have been going up pretty consistently the past few years," said Danielle Hale, chief economist at realtor.com. "In the last 13 months, rents have increased four percent nationwide. That’s not huge but relentless increases year after year add up. If buyers can lock in a monthly mortgage with a 30-year fixed rate, there is a huge incentive to get into the home buying market. Millennials respond to that."
They do indeed. According to an online survey of more than 1,000 active buyers conducted during early March 2018 by Toluna Research on behalf realtor.com, 23 percent of millennials surveyed indicated that rising rent was a trigger for their home buying purchase. The website reports that HUD data shows rents were up in 85 of the top 100 metro areas, including nine metros where rents were up by double-digit percentages from a year ago.
The Fort Worth, Texas apartment market is an example of how a scarcity of affordable units is driving younger residents to consider buying a home.
According to a May 2018 article in the Fort Worth Star Telegram, since 2010, 16,460 apartment units have been built in the Fort Worth area. But only four percent of these new units — 710 apartments — are now priced below the area's average rent price of $1,093 per month.
"A whopping 15,750 of these new units are being rented for above the average range. Some of these places feature views of downtown Fort Worth and access to the Trinity River and jogging trails. And they're renting for $1,900, $2,400 or even $4,000 per month.”
Some Have Buyer’s Remorse
To make a confusing situation even more perplexing, a recent CNBC report notes that “Millennials aren’t exactly jumping for joy after purchasing their homes.” The report adds that “it turns out that 68 percent of them are feeling buyer’s remorse — almost double the amount of Baby Boomers who say they have regrets. “
The report cites three reasons for this remorse:
#1 Overspending for the down payment
The survey found one in three millennials dipped into their retirement accounts to pay for their homes
#2 Underestimating on - going maintenance costs
Millennials understand basic costs, such heating and electric bills, but Bailey recommends also considering how much time and money it could take to mow the lawn, clean the house or deal with leaky faucet.
#3 Settling for something that’s not quite right
One in five said they were frustrated by damages they found after moving in, while others said they discovered the house didn't end up working well for their family.
What Millennials Want in a Home
The economic and personal values espoused by millennials are very much in the forefront of their decision to buy, rather than rent a home. As has been noted in many places, "their formative years included the financial crisis of 2008 – 2009."
"We millennials may have been scarred a little by the 'great recession,'" said Jason Hamilton of Acme Brick. "Take it from me, this was an extremely tough time to be starting out in a career, and like the folks who grew up in the Great Depression, we have developed a strong sense of value and concern about money. Constantly increasing rent is a 'red flag' for us. We want to purchase an asset that is always increasing, not decreasing, in value. The resale value of a brick home meets this objective.
"I also believe this group is looking for something more authentic than a smaller (but expensive!) cookie cutter apartment. This is another reason brick construction and natural building materials are so popular among millennials. They are real, not fake.
"Most architects and home builders that I consult with say that this younger home buyer is looking for updated kitchens and bathrooms, green features like solar panels and excellent insulation, an open floor plan, a home office, a good location, fast internet and cell service.
"Data also suggests that almost half of millennials would rather buy a new house in order to avoid any maintenance issues that might occur early on. This line of thought is due to the fact that only 11 percent of millennials consider a home to be their final residence anyway. Most see their first home as a stepping stone to the next, larger, home.
"Finally, because it comes from the earth, brick is the ultimate natural, environmentally-friendly building material and thus meets the 'authenticity' criteria of millennials. And its low maintenance allows these younger families to enjoy a better work/life balance, which is one of the other important goals for this generation."
If you're a millennial and considering the purchase of a new home, put brick construction on your wish list. It will save you time, money and grief. That way you can get on with the rest of your life! Contact us for more information.