How Millennials Are Changing the Homebuying Process
Popularized by the movie Failure to Launch, there’s a common belief that millennials are not interested in buying a home of their own, preferring instead to mooch off their parents and live rent free. Well, according to the National Association of Realtors, millennial buyers currently represent the largest share (32%) of recent buyers for the second year in a row. The sheer number of millennials that are buying is having a huge impact on the real estate market. Here are a few examples of how things are being impacted by this generation.
Some millennials may have decided to put off marriage and kids but they are definitely not putting off home buying. Some couples will purchase, cohabitate, and then marry. Some will purchase, find roommates, and pay down principle. They’re breaking the rules for when they’re buying. Additionally they tend to own for shorter period of times and have been able to flip homes with success.
Also, many millennials are eager to shop in renovated urban centers. Partially due to cost, they’re buying smaller homes that are more energy efficient, closer to the city, and cost effective. Walkability is very important, and some millennials are ditching their cars all together. They’re also shopping for homes that are unique and have character, rather than newer builds in the suburbs. Even as city prices are soaring up because of the demand, millennials are still making sacrifices by subleasing or posting rooms available on AirBnB to make it work.
Another way this generation is changing the homebuying process is by making the seller pay closing costs. It wasn’t always normal for the sellers to pay both their closing costs PLUS the buyer’s closing costs but the millennial generation is pushing for this swing, maybe because the prevalence of student loan debt is making it harder to save for a down payment. Buyers are putting as much as possible towards their down payment and need sellers to contribute towards their closing costs. These seller concessions may also be artificially increasing home values throughout the market.
The last major impact that millennials are having on the homebuying process is in regards to the use of technology. Millennials are more likely to have fully researched all possible homes, comparable homes, and more on the internet and via word of mouth before stepping foot into a home. They’re wanting data at their fingertips and for the information they can not obtain, they’re expecting real estate agents to get it for them at a moment’s notice. They may not pick up the phone and ask questions but they’d like the information texted or emailed to them right away.
In a recent interview with Jed Kolko, Senior Fellow for Housing Innovation at University of California, “…millennials are actually as likely to own a home and as likely to live with their parents as young people were 20 years ago.” Statistically, there’s no difference but numerically, millennials are a force to be reckoned with. They’re breaking the rules by buying before marriage, owning for shorter periods of time, buying in the city, asking for sellers to pay closing costs, and using technology more than ever. The home buying process is beginning to adapt to these changes and will continue to do so in the years ahead. Buckle up.
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