Millennials are considered the next wave of home buyers. Yet, when it comes to their feelings about real estate, many myths persist. BUILDER online recently sorted out fact from fiction when it comes to this coveted generation of home buyers.
Myth 1: Millennials can’t afford a down payment.
True, most millennials are in debt with an average savings rate of -2 percent, according to Moody’s Analytics. But they’re no different than generations before them. “If anything, they’ve actually saved more,” says Mark Zandi, Moody’s chief economist. “Their saving rate has been higher; probably in terms of dollars they have not saved as much just because their incomes have been lower in the tough economy, but I don’t know that they’re behaving any differently.” For those who are saddled with high student debt or plagued by paying high rents, low down payment options are available. Freddie Mac and Fannie Mae set new terms recently that allows for as little as 3 percent down for first-time buyers. On a median new-home price of $305,000, the down payment would then equate to $9,150 down.
Myth 2: Millennials don’t care about home ownership.
Generation Y isn’t doomed to be a generation of renters only. “This is a group that doesn’t have as many rules as their parents,” says Mollie Carmichael, a principal at John Burns Real Estate Consulting. “To get married by the time they’re 24 isn’t their goal. To have two to three children isn’t the plan, to get married first and then have children—not necessarily their rules.” As such, the interest in home ownership is still there, it’s just been delayed. Carmichael predicts 2019 will be the year when the majority of the millennial generation will become most interested in buying homes. “I’m seeing that buyer settle down at age 30 to 31 versus their parents at 24 to 26,” she says. “As I start to look at consumer insights, I look at interest and when they want to buy. With Gen Y, that’s at 30 and older. … It is the American dream to own a home. People associate success with owning a home, and millennials are no different. If I’m not getting married or having children, then there is no urgency to buy a home. And until I do, the urgency isn’t there.”
Myth 3: Millennials want only urban, walkable areas.
The number of 20-year-olds living in cities has been on the rise but so has the number of 20-year-olds living in suburban and rural areas too. Gen Y is much larger than Gen X. Some surveys have shown that millennials currently prefer to live in an urban setting, but reports of millennials “flocking” to cities have been exaggerated, says Wendell Cox, an urban planner. “In the context of the total millennial population, it is small,” he says. The majority of millennials are still in their 20s – an age when most are single and not wanting to settle down yet. As they grow up, get married, and have kids – preferences like finding a good school district will likely prompt them to look elsewhere. Indeed, a survey of millennials from the Demand Institute shows that 48 percent of this generation will look to the suburbs to purchase a home.
Myth 4: Millennials will pay a premium for green and tech home features.
Sure, millennials say they place importance on being environmentally friendly and technologically connected – more so than other generations. But the cost will likely be the biggest factor for young buyers when choosing to adopt such features in their home. Many surveys show that millennials desire tech and energy efficiency in their homes but are most interested in additions that help them save money. For example, a survey by the Better Homes and Garden Real Estate of 18 to 35-year-olds found that their most desired home technology feature is energy-efficient washer and dryer, a security system, and a smart thermostat. The biggest question is not their desire, however, but if they will be able to afford such upgrades.
Source: “Millennial Home Buyer: Fact vs. Fiction,” BUILDER Online (2015)