POST TAGSMortgage News
Blog posted On March 09, 2021
For decades, Millennials have sat on the sidelines and delayed milestones like homeownership. Two years ago, Millennials – people born between 1981 and 1996 – officially became the largest generation in America, totaling at 72.1 million people. Last year, they became the largest home buying population in America, making up 38% of all buyers. And today, they’re driving the housing boom – with existing sales up 24% annually.
Home sales have surged over the past year, largely as a result of low mortgage rates. In January, existing home sales were up to a seasonally adjusted annual rate of 6.69 million purchases. “Sales easily could have been even 20% higher if there had been more inventory and more choices,” said Lawrence Yun, chief economist for the National Association of REALTORS® (NAR). “The housing outlook looks solid for this year.”
More and more Millennials are entering the housing market as remote work capabilities, higher earnings, and low interest rates have put them in a good position to buy. Consequently, their purchases and preferences are shifting housing market trends.
Nature and Work/Life Balance
Since the coronavirus pandemic began, buyers have been leaving bigger cities in search of areas with more space. In previous years, the common trend for young, working adults was to flood the cities – either in search of jobs or as a result of getting a job. However, when the coronavirus hit, many non-essential workers were forced to leave the office and work from home. When companies saw that working remotely was actually not hurting but helping their productivity, many decided to let their employees stay home permanently – or at least adopted a flexible part-time work from home arrangement.
With this increased ability to work remotely, home buyers are realizing that they don’t need to flock to the cities. “It’s the difference of choosing where you want to live vs. living where you work,” said Bradley Nelson, chief marketing officer of Sotheby’s International Realty. “Millennials are thinking about their overall lifestyle. It’s propelled these second-tier markets into the top of the interest list.”
Younger Millennials grew up in the technology boom, and the older Millennials helped design a lot of modern technology that is commonplace today. Technology is in their DNA. From touchless features to more sustainable systems, a lot of today’s buyers will be shifting focus on what they are looking for in a home. Some examples are energy-saving geothermal systems, to solar panels, to green roofs. “If a home is move-in ready and environmentally conscious and has a Tesla charger installed in the garage, those homes are generating a premium, because you have so many buyers interested in competing for them,” said Nelson.
Proximity to Family and Schools
While proximity to family may have always been a desirable feature in a home, it probably wasn’t as realistic as it is now. With the increased freedom of telecommuting, people are able to work where they live instead of live where they work. With this freedom, many people are moving closer to loved ones – with over 50% of home buyers between the ages of 22 and 29 placing high value on a home’s close proximity to friends and family.
Another important home location factor for Millennials (older Millennials in particular) is the proximity to schools. Forty-six percent of home buyers aged 31 to 40 said that the quality of school district is very influential in their location choice. Comparatively, proximity to healthcare facilities is more important to the Boomer generation now.
Overall, more Millennials – first-time home buyers in particular – are entering the market. First-time buyers represented one third of all home sales in January, and with the proposal of Biden’s $15,000 tax credit specifically designed for first-time buyers, that percentage could increase even more.
“We expect a significant portion of purchase demand in the coming years to be driven by millennials and the younger-age cohorts,” said Joel Kan, Mortgage Bankers Association. Millennials are no longer waiting for their parents to pick them up from the mall. They’re in the driver’s seat and ready to take home buying action. And we’re ready to help. If you’re looking to jump into the market, let us know and we will help you with your preapproval.
Source: Apollo Technical, The Atlantic, Bloomberg, Brookings, HousingWire, NAR, NAR, Pew Research