In the past decade, the real estate industry has struggled with getting millennials to purchase homes. But in the next five years, 66.1 percent of millennials are now planning to purchase, creating a radical influx of new buyers into the market. Millennials are increasingly turning to homeownership because they no longer want to rent, are now earning more, or are getting married. And because millennials have different values and needs than their predecessors, they impact the market in different ways.
How Millennials are Impacting the Housing Market
Fifty years ago, it was commonplace to purchase a "starter home" and then upgrade later. But from the late 1990s to the mid-2000s, the practice changed to immediately purchasing a large home with the idea of living in it for quite some time. This practice was ultimately seen as unsustainable (and one contributing factor to the housing crash). Millennials are far less likely to view their first home as their "final home." In fact, many of them don't even see it as a starter home. Instead, they see homes as temporary. Only 11 percent of millennials see home buying as something permanent. Instead, they see it as a path towards what they truly want and a way to get out of renting.
Millennials are also more likely to buy newly constructed homes, and they are hesitant to purchase homes that need work. In the past, a "fixer-upper" was something that could be invested in; now, millennials want their homes to be "move-in ready." Andy Moult, General Sales Manager of M/I Homes of Central Ohio, tells us that "millennials are going to be one of the largest home buying generations we've seen. They already started and will continue to drive the market for years."
How Home Builders and Sellers Must Adapt
Millennials are looking for contemporary, family-focused homes, which isn't so far off from prior generations. The emphasis now is on family and entertainment spaces — areas where friends and families can gather within the home. This has contributed significantly to the rise of open floor planning. Because millennials aren't looking for each home to be their forever home, they are more willing to accept smaller homes as long as they are well-designed, modern, and comfortable.
Millennials are also looking for homes differently. Many of them will conduct their own searches online before they ever look for an agent. However, 92 percent of millennials will use a realtor for their actual home purchase. This means that sellers need to be conscientious about getting their name (and their branding) out to their market. Moult, again, tells us that "social media and online search engines are primary" ways to market to millennials.
Though millennial buyers did hold off on entering the market for a while, now that the market has grown they are starting to enter into it again. They will likely be one of the largest home buying generations, but their tastes have shifted towards affordable, comfortable, and easy to maintain housing.