Wednesday, May 27, 2015
Orlando REALTOR® | May/June 2015
The allure of homeownership persists for young adults, who have overcome daunting challenges to become the country's largest group of buyers
Millennials (also known as the millennial generation or generation Y) are those whose birth years range from the early 1980s to the early 2000s. If you’re not already targeting this younger clientele, better get right on it. Research shows that the millennial generation is the group most likely to use an agent to purchase their home, and millennials represented the largest share of homebuyers in 2014.
According to the 2015 National Association of REALTORS® Home Buyer and Seller Generational Trends study, the millennial generation – defined by NAR as ages 18 to 34 – made up 32 percent of all 2014 homebuyers. Baby boomers ages 50 to 68 made up 31 percent of buyers last year, followed by generation X (35–39) at 27 percent, and the silent generation (69–89) at 10 percent.
The survey, which was answered by more than 6,500 buyers, shows that 80 percent of millennial and generation X buyers believe purchasing a home is a good financial investment. Millennials also cited the desire to own their own home was listed as the top reason for their purchase, along fixed monthly mortgage payments and the long-term financial stability homeownership can provide. It’s heartening that young adults are attracted to homeownership despite having witnessed the housing downturn and subsequent slow recovery in the early years of their adulthood.
Millennials definitely face challenges when it comes to buying a home; researchers believe the share of millennial purchases would likely be higher if not for numerous financial obstacles. Many millennials have endured underemployment and subpar wage growth, rising rents, and crushing student debt, factors which have made saving for a downpayment a challenge and left these potential buyers unable to take advantage of our current low interest rates.
Regardless, with millennials entering their peak buying period and expected to soon surpass boomers in total population, this is a group that deserves attention!
Characteristics of the Millenial Homebuyer
The median age of millennial homebuyers was 29, their median income was $76,900, and they typically bought a 1,720-square foot home costing $189,900 ($180,000 a year ago).
Eighty-four percent of millennials — the most of all homebuyers — believe their home purchase to be a good financial investment.
Compared to other generations, millennial buyers were more likely to be an unmarried couple (14 percent). Generation X buyers (68 percent) were the most likely to be married and younger boomers had the highest share of single female buyers (23 percent).
When asked about the primary reason for purchasing a home, the desire to own a home of their own was highest among millennials at 39 percent.
Characteristics of the Millennial Home Search
Regardless of their age, buyers used a wide variety of resources in searching for a home, with the Internet (88 percent) and real estate agents (87 percent) leading the way. Millennials were the most likely to use a real estate agent, mobile or tablet applications, and mobile or tablet search engines during their search.
Although the Internet was the top source of where millennials found the home they purchased (51 percent), they also used an agent to purchase their home at a higher share (90 percent) than all other generations.
Although most purchases by all generations were in a suburban area, the share of millennials buying in an urban or central city area increased to 21 percent in the past year (19 percent a year ago).
The majority of all buyers (79 percent) purchased a detached single-family home. Seven percent of millennial buyers bought an apartment, condo, or duplex in a building with two or more units.
Among the biggest factors influencing neighborhood choice, millennials were most influenced by the quality of the neighborhood (75 percent) and convenience to jobs (74 percent).
Millennials plan to stay in their home for 10 years — perhaps indicating their expectation to become move-up buyers — while the baby boom generation as a whole plans to stay for a median of 18 years.
Characteristics of the Millennial Home Purchase
Ninety-seven percent of millennials financed their purchases, with a median downpayment amount of seven percent.
Younger buyers who financed their home purchase most often relied on savings for their downpayment, and 25 percent of millennials received a gift from a relative or friend, typically their parents to help with their purchase.
Twelve percent of all recent buyers had delayed their home purchase due to outstanding debt. Among the 22 percent of millennials who took longer to save for a downpayment, 54 percent cited student loan debt as the biggest obstacle.
Younger buyers were more likely to finance their purchase with a low downpayment Federal Housing Administration-backed mortgage.
Characteristics of the Millennial Home Seller
In 2014, the older the seller was, the longer he or she was in the home. Millennials sellers had been in their previous home for a median of five years.
While all sellers wanted help in marketing their home to potential buyers, younger sellers were more likely to want their agent to help with pricing the home competitively or selling within a specific timeframe.
For Brokers Only
Helping Young Agents Flourish
Three ways to attract and retain young, newly licensed real estate practitioners at your brokerage.
Engaging young professionals is important for the future growth your brokerage. The process doesn’t have to be time consuming or awkward! Brokers discussing strategies for reaching out to younger licensees came up with these suggestions during the Ideas Exchange Council at the 2015 REALTORS® Legislative Meetings & Trade Expo in Washington D.C.
1. Shift your culture. Adopt the “we attitude” that incubates the inclusive work environment favored by millennials. Recognize accomplishments, foster collaboration, and show an interest in their involvement.
2. Hire qualified support staff from the same peer group to provide resources and encouragement to agents of all ages. These younger staffers can motivate other young, new practitioners in particular to excel in the business.
3. Create educational opportunities. It often naturally falls on the broker to train newly recruited licensees. Besides in-house coaching, brokers can provide avenues for supplemental education. For example, offer educational loans to newer licensees so they can take designation courses to better equip them for the market.
By Erica Christoffer, REALTORMag