Owning a home is part of the American Dream, right? If so, how are homeownership rates the lowest they’ve been in 48 years?
There are several factors involved, including a strong rental market and a lack of traditional household formation.
What you shouldn’t do with that information is try to blame everything on Millennials.
Like every other age group, they play a part in contributing to the issue, but it wouldn’t be fair to put this issue squarely on them. If you read HousingWire regularly, you know we’ve cautioned against generalizing about Millennials in relation to marketing, but that warning now also extends to generalizing in relation to home buying.
Need convincing? Here are some fast stats about Millennial homebuyers — those aged 34 and younger — that show that they are not only buying homes, but also what trends they’re following as they do.
Who is buying?
Millennials might not all be forming households in the traditional sense of being a married couple, but they’re definitely still buying.
According to a study of generational trends by the National Association of Realtors, of Millennial home buyers, 65% are married couples, 14% are unmarried couples, 12% are single females, 8% are single males and other combinations create the last 1%. So, being unmarried isn’t keeping Millennials from buying homes.
The same study shows Millennials are also doing a fair amount of research before getting started with the home buying process. For instance, 44% of Millennials looked online as the first step in their process, 17% looked online for information about the home buying process, 10% contacted a real estate agent, and 10% talked to a friend/family about the process.
Millennials are also working more now than they were even compared to last year, with unemployment down to 5.3% as of June 2015, as opposed to last year’s 6.1% in June, according to the US Department of Labor.
And those jobs are giving them a fair amount of money. According to the same NAR study, 31% make more than $100,000.
The NAR also has a different study about existing home sales statistics. That study shows Millennials are spending money on building and buying homes, with sales for the last year of all homes ranging from $100,000 to more than a million.
$1M+ : 3%
The generational trends show that most Millennials are moving out of the rental market and staying out. Fifty-nine percent of Millennial homebuyers rented their residence prior to becoming a homeowner.
It also shows where the Millennials are buying those homes. Forty-nine percent are buying in the suburbs, 21% in urban areas, 17% in small town, 13% in rural districts, and 1% are buying in resort towns. This is a more diverse buying pattern then those from 35-49, who are buying 60% of their homes in suburbs.
The largest portion of those homes, 40%, are being built and bought in the South. About a fourth, 24%, can be found in the Midwest, followed closely by the 23% in the West and 13% in the Northeast.
Not only are Millennials buying homes, but they’re relying on real estate agents to seal the deal. The trend study shows 90% of Millennials used an agent to close their deals, with only 5% going through the builder and 4% buying directly from the previous owner.
Technically, if you wanted to blame a generalized age group for the dip in use of real estate agents, Gen X, those in the 35-49 age range, could qualify, since only 88% of those homebuyers used an agent.
Millennials are definitely buying homes. So the next questions becomes, what can we do about the low number of homes being bought?
Time for a reality check. Do we really expect people to buy houses that are more expensive then foreign cars? Is there a valid reason behind the general feeling that the home buying process is too daunting? Are there rules in place that systematicly make getting approved credit difficult for buyers?
The issue isn’t that one group is neglecting the market, maybe it’s the market itself.