Who are millennial homebuyers?
Wednesday, November 16, 2016
Millennials are back in the real estate news. After a much-anticipated influx of millennial homebuyers last year that never materialized, new data show millennials have been quite active in the housing market this year. Predictions are they will have an even greater presence next year.
Who are these millennial homebuyers? And will their fellow cohort members follow them into the ranks of homeownership?
First-time homebuyers nearly fell off the real estate radar last year, accounting for only 32 percent of all home purchases, the tail of three-year downward trend that nearly hit an all-time low. That trend has ticked upward this year, with first-time homebuyers making up 35 percent of the housing market, according to the National Association of Realtors' 2016 Profile of Home Buyers and Sellers.
Millennials were the main driver of that surge. The median age of first-time buyers in this year's survey was 32, which is to say that half of first-time buyers were age 32 or younger. The oldest millennials turn 35 in 2016, the youngest 19.
"Those under age 35 made up 61 percent of first-time buyer transactions," stated NAR Chief Economist Lawrence Yun. "Young adults are settling down and deciding to buy a home after what was likely a turbulent beginning to their adult life and career following the Great Recession."
Among respondents to the latest Zillow Group Consumer Housing Trends Report, based on a survey of more than 13,000 homeowners, sellers, buyers and renters, half of all home buyers who purchased a home within the 12 months prior to April 2016 were adults age 36 or younger. Millennials made up the largest portion of all homebuyers, at 42 percent.
In contrast to the NAR survey, nearly half (47 percent) of the respondents to the Zillow survey were first-time buyers, and millennials accounted for more than half (56 percent) of those transactions. The median age of first-time homebuyers was 33.
Millennials who are purchasing homes are more likely to be older (30-35), married or cohabiting with someone, employed and earning a good income, and college educated. That may help explain why, in the Zillow survey, 47 percent of millennial homebuyers had decided to purchase a home in the suburbs.
The NAR study found that single women, many of them younger, also made up a substantial portion of first-time buyers (17 percent). Single men accounted for only 7 percent of first-time sales.
Attitudes toward buying a home shift considerably among younger millennials (those under age 30), who make up the vast majority of the cohort. Younger millennials are more likely to be renting and to consider renting an equally viable option to buying. They are more likely to be single and living alone or with roommates rather than with a spouse or partner. Many prefer living in urban areas rather than suburbs. The Zillow survey found one-third of millennials lived in an urban center.
Results of a survey conducted by Forbes magazine to identify this year's crop of candidates for its "30 Under 30" list of outstanding young talents shows that among successful younger millennials only 28 percent currently own a home, and nearly 8 in 10 (79 percent) live in a city.
Moreover, when asked "What is the American dream to you?", only 5 percent mentioned owning their own home. Only 1 in 5 (19 percent) said saving for a home was their number one financial priority, and 1 in 10 (11 percent) expressed that their number one financial concern was never having enough money to afford a home.
Clearly, life stage issues and not just cohort values help to account for these differences in home buying preferences and attitudes. These data suggest that over the next year or two millennials will gradually increase their numbers as homebuyers — and those numbers will not be insignificant. But the big boom in millennial home purchases is likely three or four years off yet.
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