More Millennials Are Preparing to Buy Homes and They Know What They Want
- Chelsea Beebe
- Real Estate Business
It's no secret that the national level of homeownership is lower today than most economists and housing market analysts would like it to be.
According to the U.S. Census Bureau, the homeownership rate was 64.7 percent through the second quarter of 2014. That's down just slightly from 64.8 percent in the first quarter, and more significantly from the pre-recession era, when it hovered just below 70 percent. The decline can be attributed to any number of factors, ranging from tightened regulations and standards for mortgage credit approval to the rising cost of college tuition, which has led to ballooning debt for many would-be buyers.
The millennial generation—a demographic directly affected by those debts and other recession-induced ills—is frequently cast as both the problem and the eventual solution. The common perception is that many of these younger adults are irresponsible with the money they have, incapable of saving and generally indifferent toward their role in sustaining the economy. Exacerbating the issue is the fact that, based on what they saw happen to their homeowner predecessors during the subprime mortgage crisis, many millennials are dubious about the prospects of relying on a home as an investment. Yet, most economists readily agree Generation Y also holds the key to cyclical market growth, since someone will have to buy all these baby boomers' homes.
In contrast to the notion that many of these younger adults are freeloaders working part-time jobs, failing to save money and generally delaying financial responsibility, recent reports suggest millennials are not only thinking about buying homes, but actively doing research toward that goal. Demand among younger adults is actually on the rise, as noted by a recent Wells Fargo survey, which also found younger would-be buyers possess a greater knowledge of the mortgage application and buying processes than they're credited with having. What's more, based on data compiled by real estate listing service Redfin, Generation Y has been stepping up its online searches with real designs on making the homeownership dream a reality. Redfin found 92 percent of respondents between the ages of 25 to 34 want to transition from renters to buyers in the near future.
Buying Based on Lifestyle Preferences
As a recent MarketWatch report highlighted, these young buyers are characterized by their specific tastes and their certainty regarding what they want in a home. Amenities, ranging from customized designs to updated appliances and eco-friendly insulation systems, top the list. More generally, Generation Y buyers want homes that fit their lifestyles, both functionally and logistically. The latter priority is represented in their expressed desire to have easy access to public transportation and a wide array of shops, restaurants, nightlife and work.
Based on these convenience concerns, many neighborhoods within short commutes of city centers are seeing more views online—a large portion of which can be directly traced to millennial house hunters. Areas such as Chicago's Near North Side, Georgetown in Washington, D.C., and the Seattle enclaves of Ballard, Magnolia and Queen Anne, tend to fit the description.
"The story line has been that millennials are not forming households, they're living with mom and dad," said Jonathan Smoke, chief economist for Realtor.com, told MarketWatch. In actuality, Smoke said, mobile real estate applications and other forms of online research are helping facilitate the shopping process, and there's ample evidence to suggest millennials are not only considering homeownership, but actively preparing for the investment by saving and familiarizing themselves with the loan approval process.
It may take some time before all the research and prep work results in an improved national homeownership rate, but if millennials prove responsible for the shift, many of the misguided notions about their generation should evaporate.