Profile of the Millennial Home Buyer
- posted 4.6.2016
- Courtney Lynch
- Real Estate Business
Due to their massive size, millennials have proven to be disrupters in many industries, and real estate is no exception. As millennials reach peak home buying age, real estate agents have started to pay special attention to the way millennials prefer to move through the process.
They are a unique generation, with habits and preferences unlike any other previous group of home buyers. According to the National Association of Realtors, they have also made up the largest portion of home buyers for the past two years.1 As a result, understanding the traits of the average millennial in search of a home is vital for a real estate agent to provide the best possible customer service.
How Millennials Communicate
In general, millennials have no interest in talking on the phone. U.S. News & World Report explained they would much prefer for real estate agents to contact them via text or email.2 Player Murray, managing broker at Berkshire Hathaway HomeServices York Simpson Underwood Realty in North Carolina, told the publication millennials have no desire to waste time talking on the phone for something that does not merit an entire conversation.
How Millennials Search for Homes
For millennials, finding a home is all about mobile. The 2015 NAR Home Buyer and Seller Generational Trends study found they are the most likely generation to use a mobile or tablet application as well as a mobile or tablet search engine during their home search.
According to U.S. News and World Report, all of this technology has made the millennial home buyer incredibly informed. By the time millennials sit down with a real estate agent, they have likely already determined which neighborhood they want, and they may already have a list of homes in which they are interested.
Real estate agents, however, need not fear that they have been replaced by apps. Despite their love of Internet research, millennials depend on real estate agents more than any other generation. The NAR survey reported that while 51 percent of millennial home buyers used the Internet as a major shopping source, 90 percent used a real estate agent.
Millennials have a massive amount of information available at their fingertips, and they need real estate agents to help them sift through that information. The home buying process is overwhelming, and real estate agents are integral sources. Millennials rely on an agent's knowledge and experience to guide them through the process and tell them if their decisions are correct.
U.S. News and World Report emphasized that millennials want to be a part of every step of the home buying process, so real estate agents should treat them as partners, rather than customers. They want quick, efficient communication. In addition, millennials choose their agents based on referrals, so agents should make sure to have testimonials and online reviews on their website.
Why Millennials Want Homes
According to Forbes contributor Lucy Mueller, many millennials are approaching home buying with an investor attitude.3 They are not purchasing homes with the intent of living in them for long periods of time. Rather, they want to spend a short period fixing them up before selling them for a profit. Millennials are even prioritizing home buying over other important milestones, like marriage. The massive costs of weddings have become a turnoff to millennials, and they are demonstrating a preference to put that money in real estate instead.
Nela Richardson, chief economist at Redfin, told Mueller millennials are less focused on large suburban homes and instead are focusing their searches on homes in urban areas - properties that are close to their offices and in walkable neighborhoods. These properties, Richardson said, are very good investments.
The NAR survey found millennials' top reason for purchasing a home was the simple desire to own their own home.
"Fixed monthly payments and the long-term financial stability homeownership can provide are attractive to young adults despite them witnessing the housing downturn and subsequent slow recovery in the early years of their adulthood," Lawrence Yun, NAR's chief economist explained in the survey report.
The Problems Millennials Face
While Millennials have recently made up the largest portion of home buyers, Yun explained there would be even more of them if not for the financial barriers stopping many from taking the plunge into homeownership.
More than any other group, millennials face crippling student loan debts. Mueller said the average college graduate owes about $28,400. There are programs to help millennials buy a home despite this debt, but it is still difficult to afford a down payment. Mueller said another obstacle is competition with investors. Because millennials are searching for short-term homes, they are often bidding against investors who are willing to pay cash upfront.
The Bottom Line
"Millennials will have a huge impact on the housing market for the next decade, just because of demographics alone," Richardson told Mueller. "So whatever a few of them do, there's enough of them that they'll make a big impact."
According to U.S. News and World Report, there is still a generational gap between real estate agents and their millennial customers, as many agents are older and accustomed to different ways of conducting business. Understanding these traits are key to providing the best possible guidance to the millennial home buyer.
The major thing to remember is millennials now depend on agents to help them understand information, rather than to help them find it.