A growing share of homebuyers are millennials and even more of them now purchase single-family homes outside cities, according to the 2016 National Association of Realtors® Home Buyer and Seller Generational Trends study, which evaluates generational differences of recent home buyers and sellers.
Millennials Like the “Burbs”!
The survey, that is a free download, discovered that education loan debt is more predominant among millennial buyers, however they aren’t the generation with the largest student debt balances. The share of millennials buying in an urban or central city area decreased to 17 % (21 percent this past year) in this year’s survey, and fewer (10 percent) purchased a multifamily home compared to a year ago (15 percent). Overall, the majority of buyers in all of the generations prefers a single-family home in a suburban area – plus the younger the buyer, the older the house they purchased.
“The median age of a millennial home buyer is 30 years old, which typically is the time in life where one settles down to marry and raise a family,” says Lawrence Yun, NAR chief economist. “Even if an urban setting is where (millennials) like to buy their first home, the need for more space at an affordable price is, for the most part, pushing their search farther out. “Furthermore, limited inventory in millennials’ price range, minimal entry-level condo construction and affordability pressures make buying in the city extremely difficult for most young households,” Yun adds.
For the third straight year, millennials made up the largest number of recent buyers at 35 percent (32 percent in 2014) – a lot more than younger and older boomers put together (31 percent). Generation X comprised 26 % of buyers, and also the Silent Generation made up 9 percent.
Financing the purchase
While debt delayed saving for a down payment for a median of four years for all buyers, the number of years postponed increased from three years for millennials to six years for older boomers. Among the list of buyers who said “saving for a down payment” was the most challenging task, millennials were more than likely to note student debt (53 percent) as the primary cause, while Gen X (44 percent) and younger boomers (36 percent) cited credit card debt.
According to Yun, student debt probably impacts more than just the millennials. “Whether it’s from financing their own education or borrowed for their children, it’s somewhat surprising to see a higher median amount of student debt among Gen X ($28,000) and younger boomer buyers ($29,100) compared to millennials ($25,000),” Yun says. “One of the many reasons housing supply has been subdued in recent years may be because a segment of homeowners have decided to delay trading up or moving down in order to pay down their debt, including from student loans.” The analysis found that more homebuyers are depending on financing – 86 percent in comparison to 88 percent last year. Younger buyers who financed most often relied on savings for their down payment, and older buyers tended make use of proceeds from the sale of a primary residence.
Overall, the median down payment ranged from 7 percent for millennial buyers to 21 percent for older boomers and the Silent Generation. Nearly a quarter (23 percent) of millennials cited a gift coming from a relative or friend – typically their parents – as a source of their down payment.
Characteristics of buyers
Millennial homebuyers median income this year was $77,400 ($76,900 in 2014), and they also typically purchased a 1,720-square foot home costing $187,400 ($180,900 this past year). The typical Gen X buyer was 42 years of age, had a median salary of $104,700 ($104,600 a year ago) and frequently purchased the largest home compared to other generations (2,200-square feet), at a cost of $263,200 ($250,000 a year ago).
Generation X buyers (71 percent) were the most likely to be married, younger boomers had the greatest share of single female buyers (20 percent), and 12 percent of millennial buyers were unmarried couples. The millennial generation’s primary reason to buy? They want a home of their own, in line with 48 percent (39 percent last year). The desire for a bigger home was highest among Gen X buyers (16 percent), and older boomers (20 percent) were most likely to buy because of retirement.
Searching for and buying a home
Nearly all buyers predominantly used the Internet and a real estate professional during the home search process: 87 percent of millennials and Gen X buyers used a realtor and were also the most likely to use mobile or tablet applications and mobile or tablet search engines throughout their search. Gen X buyers were by far the most likely to visit an open house. “Supply shortages, strong competition and rising home prices in today’s market may make purchasing a home very stressful,” says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “While the Internet is the initial go-to destination to search for available listings, consumers want the expertise and insights of a Realtor to help them find the right home within their budget.”
Gen X buyers represented the largest share of single-family homebuyers at 89 percent (85 % a year ago), and younger boomers were more than likely to buy a townhouse or row house (9 %). A combined 3 % of millennial buyers bought an apartment, condo or duplex in a building with more than one units (7 percent a year ago). Neighborhood quality had the strongest impact on millennials for their home selection (63 percent) and convenience to jobs (60 %). Gen X south convenience to schools, and the Silent Generation wants proximity to friends and family.
Characteristics of sellers
Those very likely to be trading up (Gen X homeowners, 25 percent) or trading down (older boomers, 24 percent) represented the greatest share of sellers in the past year. Millennials – also likely to be move-up buyers – stayed in their home the shortest length of time before selling (5 years).
Even though younger sellers were more likely to need a larger home or move because of a job, older boomers were a great deal more likely to move farther away. Sellers overall moved an average distance of 20 miles, but older boomers traveling farthest: 75 miles. Across every generation, sellers overwhelmingly used a real estate agent or broker to sell their home (88 percent or more). Younger sellers largely wanted a realtor to help price their home competitively or sell inside of a specific time frame; but “help finding a buyer” was a top reason for younger and older boomers.
In July 2015, NAR mailed out a 128-question survey utilizing a random sample weighted to be representative of sales on a geographic basis to 94,971 recent homebuyers. The recent homebuyers had to have purchased a primary residence home between July 2014 and June 2015.