Over the last several years, millennials have rented to stay nimble and keep work opportunities open. Now, they’re ready to buy.
Why it matters: About 4.8 million millennials are turning 30 in 2021, and many are expected to enter the home-buying game if they haven’t already.
- This wave of new buyers will have the opportunity to build and pass on wealth, and shape the market for years to come.
Flashback to the financial crisis of 2008. Many people bought homes they couldn’t afford and developers gobbled up foreclosures, David Kennedy, president of Charlotte-based Canopy MLS, tells me. We’re still feeling the impacts of that.
- First-time millennial buyers learned from that and are heading into the market with the knowledge their first home may not be their dream home.
- They’re more open to multi-family options like condos and quadraplexes, so they can start building wealth despite low inventory of single-family homes.
The big picture: Millennials are getting older and entering a new stage of life. Millennials have been dubbed the “renter generation,” but that moniker doesn’t really account for stage-of-life, Realtor.com senior economist George Rati says.
- The oldest millennials are turning 40 this year. They’re starting to want more space for their growing families.
- First-time buyers are also ready to build equity, have more space, and take advantage of low relatively mortgage rates.
The state of play: Home-buyers are entering a competitive market, with inventory down and home prices surging across the board. Low mortgage rates certainly give buyers more power, but there has to be a home to buy to take advantage of current deals.
According a Realtor.com study:
- 43% of first-time millennial homebuyers have been looking for more than a year.
- 44% say they still need more money for a downpayment and other closing costs.
- 34% say they can’t find a house in their budget.
Where they’re going: Millennials are leaving larger cities like New York and heading west or south. Migration patterns, according to SmartAsset, show five of the top 10 most popular states among millennials have no income tax.
What millennials want: Rati says the average millennial buyer wants a house with a nice backyard in a desirable, quiet location.
- A garage, updated kitchens and bathrooms, good schools, and attractions nearby are also common wishlist items.
Millennials with money want to spend it. Grandfather Homes president Matt Ewers, who builds $1M+ custom homes, says he’s noticed millennial buyers “are willing to spend it as they make it,” adding amenities like $150,000 pools during the building process.
“They’re not all investment bankers either,” he says. Millennials who are able to afford the bonus luxuries are involved in anything from sales to multiple side hustles.
Bottom line: “Looking ahead,” Rati says, “millennials will continue to be dominant participants in housing markets.”