The average age of first-time home buyers is 33, rising from the previous age of 31. What does this mean for realtors? More millennials are starting to buy their first home.
Generation Y, commonly known as millennials, were born between the years of 1981 and 1996. This group encompasses the modern twenty- and thirty-somethings.
This means millennials are now hitting the sweet home-buying age, and many likely already own homes.
But millennials had it a little rough.
They faced a serious economic recession in the early 2000s, they’re faced with thousands of dollars worth of student loan debt, and they’re also the victim of a renting generation and increasing rental costs.
These trends affected the real estate market and how millennials buy a house. Here’s what buyers and sellers should know about the millennial housing market and the trends millennials are causing.
More Buyers in the Next Few Years
Things weren’t looking good for millennials 15-20 years ago. Now, the economy has improved and millennials have more job security. Even in the student loan debt generation, millennials feel they’re ready to buy a home.
In addition to this, we’re currently in a buyer’s market. Sellers are starting to lower prices, attracting millennials who are ready for home ownership and aren’t satisfied with the expensive rental market.
They Will Buy Entry-Level Homes
Even in a buyer’s market, millennials aren’t rich. On average, millennials make a little under $22/hr. This only leaves them at about a $42k salary.
While millennials are financially comfortable, they’re smarter with their financial decisions. They will work within their income and choose a home they can afford over one they can want. This is why they will purchase entry-level homes.
What’s an entry-level home? These homes are smaller and not so glamorous. They could even be fixer-upper homes.
But They Still Want a High-Quality Home
While millennials are willing to settle for below-average homes, this doesn’t mean they only settle for the bottom-of-the-barrel houses.
How should realtors know which homes millennials are looking at? Look for the features that attract millennials.
First, some of the key considerations are structural damage. Millennials are better educated than their predecessors. They will research the signs of plumbing and electrical issues and will look at this more than a newly renovated kitchen.
These are new considerations a home buying company has to make. It’s integral to put the focus on a well-functioning home over a beautifully designed one.
But there are some design features that intrigue millennials more than others. Some of these include:
- Open floor plans
- Bigger kitchen
- Home office
- Updated bathroom
- New technology and appliances
- Eco-friendly and energy efficient
- A good location
For house flippers or sellers who are renovating their homes, keep these features in mind when attracting a millennial buyer.
They Will Use More Technology
Millennials grew up in a world of technology. Therefore, tech will influence their buying decisions.
They don’t want to see a home first at an open house.
They will first want a virtual tour before they visit the house. They won’t trust everything a realtor says. They will Google their questions and will come to their realtor meeting prepared and educated.
Realtors will have to meet this demand by offering all of the tech that millennials desire.
New Buying Strategies
Tech isn’t the only feature that realtors and sellers need to implement. Millennials changed the way we shop. You can conveniently buy products on social media and opt for same day shipping on a variety of stores.
Realtors and sellers can use these strategies to sell their home. First, start promoting homes on social media. Use digital marketing tactics to increase your online visibility.
Utilize online reviews to ensure your realty company has a good reputation.
In addition to promoting your home, promote yourself as a real estate influencer. Increase your social media following and create valuable content. This will not only increase your visibility but will create trust between you and buyers.
Interest Rates, Mortgages, And Credit
One of the downfalls of the millennial home buyer is their mortgage. In 2018, millennials had an average credit score of 665.
This means that millennials have average credit, meaning they may end up with a mortgage with a higher APR rate.
In addition, millennials may not have the best of luck putting down the required down payment.
They may opt for a lower down payment, causing them to opt for longer mortgages with even high APR rates. This makes it difficult to pay off a home.
This is another reason why millennials will opt for a cheaper and less-than-luxurious home; they would rather work with what they can afford while paying off the house as quickly as possible.
Moving to Smaller Cities
Are millennials settling in large cities such as New York and Los Angeles? Maybe they did after college. But now that they’re prepared to buy a home and start a family, they’re opting to move to smaller cities for cheaper housing.
Take Oklahoma City, for example. Millennials can afford 30% of the homes in that market. Compared to a city like San Diego, where millennials can only afford 2% of the homes on the market.
We mentioned the millennials who don’t make the most money and have less-than-perfect credit. What about millennials who are paid well and have good credit? Moving to a small town helps extend their dollars even more.
In addition, these smaller cities are better for millennials who are ready to have children. Raising a child in a small city is better than raising a child in a large city.
What about jobs? More companies are relocating or opening offices in these smaller towns. This is why millennials are opting for jobs in these areas and relocating to different offices.
The Millennial Housing Market Is Promising
Millennials are growing older and are interested in buying a home. The millennial housing market is growing and they’re bringing trends along with it.
Whether you’re a buyer or a seller, our blog offers lots of home and renovation advice. Continue reading our blog!