Contrary to popular belief, millennials are not frivolous, avocado-toast-loving, entitled influencers who can’t commit to full-time jobs. If anything, they’re a cautious, prudent, and practical category of society. This is especially true in terms of real estate trends. While baby boomers had access to an accommodating housing market, millennials, on the other hand, feel trapped. Millennials are at the age (25 to 34) when their baby boomer parents had stable finances, careers, and personal lives. However, they do not have the same luxuries and opportunities. But why are millennials taking longer to own homes? It’s important to understand the millennial mindset within the context of today’s real estate trends and homeownership.
Not Their Parents and Grandparents
The younger generation looks to the older generation not as inspirations or aspirations, but as cautionary tales. Baby boomers took advantage of the better earning opportunities during their era, hence they were able to settle down with a family and a house as fast as they did. But the divorce rate of baby boomers has doubled in the past 25 years. Today, younger people are more wary of quickly committing to anything. They see that long-term commitments are huge decisions that require years and years of contemplation.
The Student Loan Debt Burden
According to a 2017 study, American millennials are delaying homeownership by an average of seven years. Long after their college years, some are still paying off their student loan debts. Years of accumulating student loan debt ultimately affect their spending capability and the ability to save money. Thus, they are very cautious about how they are spending money—and it is evident in real estate trends. This, coupled with low credit scores, makes it harder to qualify for mortgages and make down payments.
A Later Start in Homeownership
Millennials are building wealth at a much slower pace than previous generations. Careful about money and the future, millennials are choosing to settle down, build a family, and buy a house later in life. In the 1960s, people got married within their early 20s, whereas now it is common to get married well into their 30s, or later. Because of this, there is less pressure or need to buy a house.
Millennials, especially those who have very little purchasing power, are renting for as long as they can. But for those millennials who are financially prepared to buy, they are shifting real estate trends when it comes to purchasing homes.
1. Millennials prefer to live in high-cost cities
This might seem paradoxical given their attitudes toward spending, but there is a good reason for this. The best career opportunities tend to concentrate in megacities like New York, Los Angeles, San Francisco, and Washington, D.C. Millennials are more highly educated than other generations and tend to rush to urban areas where major employers reside. While jobs may be high-paying in these areas, the cost of living is also higher as well. This makes it harder for them to save money for their future.
2. Starter Homes Race
As millennials build their wealth, they are stating small by getting small or starter homes. Small homes are usually affordable using a combination of mortgage financing and savings. However, these small homes are becoming very difficult to come by as the demand exceeds the inventory. Developers say that costs and materials are too steep and that they tend to not make money on single-family houses. But 75% of millennials prefer to live in single-family homes with an ideal floor space of 2,500 square feet, and an open floor plan.
3. Lifestyle-Focused Residential Complexes
Urban planners and developers have been trying to fight the housing crunch by building small homes and squeezing as many units in as possible. In New York and Los Angeles, 300 square feet of apartment space is quite the norm. But to make up for the lack of space, urban developers are providing amenities to make these residential complexes more livable, like pools, spas, and gyms. Real estate trends point to mixed-used complexes where commerce and residential areas are smoothly integrated.
4. Stylish, Smart Homes
Millennials want customized spaces where technology is seamlessly incorporated. Real estate trends say they like smart technology that makes daily living easier for them and their families. This means that they can control certain aspects of their house by voice or remote access. Smart technology also makes their houses more energy efficient, and as an environmentally-conscious generation, the way they automate their house reflects this value.
5. Accommodating Spaces
Millennials are smart about the use of space in their homes. They like utilizing outdoor areas as extended living space for entertaining. Every square inch should be used wisely for storage. They also value pets, so they want to live in places that welcome and accommodate pets.
Real Estate Trends and the Millennial Milieu
To millions of millennials, homeownership means stability. It means they’ve arrived, and they’ve survived. But with a tough economy, it is taking them longer to achieve what their parents and grandparents achieved in a short period. Real estate trends suggest that it may take millennials longer to buy their own homes, and they have practical reasons why. But given their scrappy, can-do approach towards their goals, homeownership is just a matter of time.