Key Ways Millennials are Changing Real Estate Markets
It should not be a surprise that millennials are changing real estate markets because many are very methodical and research-driven when it comes to buying a home. It is also extraordinary how their behavior influences today’s real estate markets, causing quite the generational shift. According to the National Association of Realtors (NAR), those 36 and younger make up the largest percentage of buyers (34%) in the United States.
Online shopping has changed the way we shop for just about everything, whether it is clothes or furniture or even homes. The millennial generation grew up as “digital natives”—people who learned and interacted with technology and the Internet since they were very young. For a lot of this younger generation, the shopping experience has always existed online, in part or in whole.
So, it should not be a shock to hear that millennials shop differently than their parents. And now, with a rise in technology and an evolving dynamic in the housing market, millennials are changing the way homes are sold.
Here are several key ways millennials are changing real estate markets around the country.
Millennials Know What They Want From Their Future Home
While local economies are steadily improving, options to help with adaptation and renovation of a new home can still be tricky, especially for many who are recently out of college and have student debt. Many millennials overcome this by looking for ready to buy houses, namely with updated and functional kitchens and bathrooms. Homes with open floor plans, home offices, and technology upgrades are also sought after.
The location of the property is also something they will pay close attention to. Many will even try to find future homes which are environmentally friendly and equipped with advances like solar panels, for example. According to a recent Zillow Consumer Housing Trends report, only 11% of them plan to call this first home permanent, while 68% see it as a future means to get the home they really want.
They Worry About Home Prices
Ok, most home buyers worry about the price of homes. However, as home prices continue to rise both locally and nationally, it sets a high barrier to entry for first-time homebuyers (the category that most millennials fall into). In many instances, they give up looking and then must contend with finding a decent place to rent.
Many millennials want independence and homeownership but are simply restrained by increasing costs. The idea of saving enough for a down payment or else risking an additional expense in the form of private mortgage insurance has a lot of them overwhelmed. Funds are often tight with very little wiggle room when new or additional expenses are added to the mix.
Location Is A Matter Of Convenience, Not Stature
Millennials will choose smaller homes if that means they will live closer to urban areas and places of work and study. Many of them are content working at home, and they like to spend their free time in recreation, so nature and open spaces need to be close and convenient. They also try to reduce the carbon footprint, and many are cycling and walking whenever they can, so it is important for them that their new place accommodates to that.
For many in this generation, their ideal setting is to find a cost-effective place, which will save them from expensive living conditions, and yet be close to farmers’ markets and coffee shops. Living close to things that are important to you is certainly a smart approach.
Millennials have different daily expenses than their parents did at their age. Today’s generation is faced with more financial decisions and recurring payments than ever before. Pricey smartphones and reliable Internet access and communication, which used to be luxuries, are now essentials. So are expensive toys and hobbies that often keep Gen Y from being able or willing to purchase a home.
Sky-high loan debt (most often from college loans but also from credit card use) follows many millennials around, too. This rise in millennials’ cost of living makes it harder for them to sign on for big purchases, both inside and outside the housing market.
They Come From Renting Mindsets
Many of the upcoming generation of potential homebuyers are renting instead of buying—and not just in real estate. The rise of tech has brought with it a rise in a renting or “sharing” economy. Services like Uber and Lyft, for example, give millennials access to a car without the responsibility of ownership. The thought process is different, because the times we now live in are different than what previous generations experienced.
While this mindset may have contributed to their slowness to storm the market, it also means that many who are looking to buy have scanned through the local real estate market, know what they want, and are ready to take the plunge. Just be prepared because when they are ready to purchase a home, they are READY!
They Want Tech Advanced Neighborhoods
Having an Internet connection is not unusual today, but millennials take it further by requiring the best signal and conditions. They want homes with the latest technology in absolutely everything they can afford, inside and out. Starting from interior smart appliances with built-in Wi-Fi from refrigerators, TVs, washing machines to easily controllable heating, and cooling with one swipe of their fingers.
The exterior often includes solar panels, rainwater collectors and low maintenance roofing. Moreover, they are savvy about finding options that fit their needs. Did you know, according to the NAR in a recent buyer/seller generational trends report…
66% of millennials cited quality of the neighborhood as a major influence why they bought a home there.
Sellers Want To Sell To Millennials
Research shows that of all first time buyers, over 60% of them are millennials. Add in that they account for a third of overall home purchases, and they are a buying force that sellers need to understand and adapt to. That is a big reason why today’s market is trying to meet their extensive requirements.
It is no wonder many home sellers are now making all the necessary repairs and improvements before listing. They even go as far as to make their homes energy efficient and environmentally friendly, as well as upgrade their appliances and install smart features. Millennials are prepared to do extensive research online just to buy the perfect thing at the best price, and buying a home is no different for them.
They Include Their Parents In The Process
The most peculiar behavior on the real estate market today is that many local real estate agents are both fascinated and sometimes confused with the buying process when dealing with millennials. Namely, millennials are the ones with wishes, requirements and information, but when it comes to closing the deal, some sellers have to do business with their parents.
It generally comes down to economics. Many millennials have to borrow or get a home gift down-payment from their parents to get a loan in the first place. There is nothing wrong with that, but it does add another layer to the real estate deal that is not often found in other generations.
Millennials May Use Smartphones to Find (and Finance) Homes
Millennials are making mobile devices a major part of real estate transactions, some of which is reflected in how they communicate with real estate agents. Millennials tend to prefer texts over phone calls in general, so real estate agents are working to adapt to the new world of texting and email, making fewer phone calls to clients or potential clients.
Additionally, millennials use apps on their smartphones to look for homes and use traditional sources less and less. In fact, millennials are twice as likely to use their mobile devices in searching for a home than the older baby boomer generation. This means that home listings need to be increasingly mobile friendly to appeal to the growing millennial market.
Beyond home searching, millennials may also use mobile apps to handle financing their homes. Companies like Quicken Loans provide options like the Rocket Mortgage app, which transforms the financing process.
As millennials expand their use of smartphones in real estate transactions, the process for buying homes continues to change. Because of technological advances, they can go through the buying process remotely. This includes searching for homes, viewing photos and video tours of homes, engaging with agents, and nearly completing the purchase and financing of homes, all from a smartphone or computer.
These changes do not mean real estate agents will be obsolete—just that they will need to adapt to fit into new ways of doing things. And in the meantime, high-tech agencies can give buyers and sellers that same feeling of constant accessibility they would get from automation, without losing the benefit of an actual person handling their needs and questions.
Millennials Look For Affordable And Modern At The Same Time
Studies show that millennials state as an absolute must for their new homes to come with completely functional and modern kitchens (the assumption is they like to both entertain and cook). In many instances, they will bypass a larger bedroom in lieu of more space in areas they will utilize more often during waking hours.
They prefer hardwood floors to rugs, like pet conveniences, and love open spaces so they can entertain guests. The bathroom is also important to them, especially if it has been upgraded. For many millennials, their idea of a perfect home is to be affordable and modern at the same time, even if that means buying a smaller home.
They Are Looking For Stress Relief Environments
Wisely, many will use moving services to take all the unwanted furniture and appliances and not be bothered with it themselves during a move. They will use eco-friendly solutions like Boomerangboxes to protect their belongings while moving. They want to save their money for travelling or important hobbies, so extreme and costly home makeovers are out of the question for many of them. Move in ready is what many seek.
This behavior goes hand in hand with their desire to live in less stressful environments with quieter atmospheres. If they do not work from home, then they want to buy homes where they will not have to commute long and preferably without busy traffic. They are very active and their time is precious to them, so they want to spend it the best they can and not waste it.
Generation Y Are Picky And Careful Buyers
Millennials will often take their time when purchasing a house since they want everything to be just the way they envisioned it. It can take months until they find the perfect property and can involve several trips back to the home to check and double-check features they like. Ideally, it would be great if they found what they wanted on the first day looking (some do), and even with the first home they see, but having a bit of patience with millennial buyers will serve sellers well.
While this approach can be a bit frustrating for agents and a time drag for sellers who are being accommodating as possible (after all, they do want to sell the home!), this methodical approach is actually making the local real estate market better as sellers are ensuring their homes are better prepared and equipped for millennial buyers. The end result for sellers is the potential for an increase in the homes value and a higher selling price.
They Do Their Research Online
As already noted, millennials tend to be more digitally inclined, leading them to search for homes differently than their parents. Older generations tend to use traditional avenues for browsing homes, depending on a real estate agent to search out potential properties and book walkthroughs.
When baby boomers purchased their first homes, real estate agents were indispensable in the early stages of the process. These buyers did not have the luxury of pulling up a website to start their home search, narrow down their options, find a target sale price, assess comparable sales in the surrounding area, or find additional information on crime rates and schools.
In contrast, millennials begin researching homes on their own by browsing sites like Zillow and Realtor.com. These sites allow them to get an idea of what they want, what is available, and how the housing market is doing, all before even engaging with a real estate agent.
According to the NAR, 99% of millennials will search for their potential homes online (compared to 89% of boomers and 77% of the silent generation).
The above are good reasons why, before advertising the property, sellers and agents need to make sure that everything published online is true and accurate. This should always be done as a matter of principle, but it is especially important because millennials will have done their research and will spot something that is incorrect or dishonest.
This means they will check all the facts you stated before even considering to setup a viewing. Also, due to their keen online investigative skills (many are social media wiz’s), both agents and sellers should be prepared to answer a lot of questions not only related to the structure but also to plumbing, electricity, neighborhoods and a wide array of other property details. The better prepared you are, the less surprised you will be when they want to know finite details about the septic tank, crawl space, circuit breakers, and even the backyard workshop.
With so much information now online, millennials focus on finding homes using online resources. As a result, these younger buyers may be better informed about the market and available homes than previous generations.
Millennials Need More Guidance through the Actual Decision-Making Process
While millennials are happy to make DIY efforts during the research portion of homebuying, they seem to need more guidance in synthesizing the information they find than older generations. A 2018 study from Owners.com found that millennials are more likely to rely on their agents during the purchasing process than Gen X or boomer purchasers. It turns out this young generation has not completely strayed from the tradition of using a real estate agent.
Buying a home is a big commitment, especially when other factors like high student loan debt and concerns about job stability come into play. It is no surprise that these first-time buyers do not want to go it alone. Many also bring family and friends into their purchasing process, the survey found.
Real estate agents should be sensitive to this trend, and make sure they offer the help their buyers need, when and where they need it. Be prepared to help purchasers understand how information translates into action, and give them advice on which properties are seriously worth pursuing.
Millennials Are Fast Adopters of New Platforms and Tech
We have already covered the fact that millennials are happy to work with technology in the buying process, but the trend of tech adoption also manifests in another way: young homebuyers care more about home automation and smart home technology. They can choose from a wide range of products to make their home more secure, convenient to operate, and customized. So if they see a home with existing smart features or the potential for easy smart upgrades, they may be more eager to sign on.
Real estate agents who do not like dealing with smart technologies should start getting familiar with the options and features as soon as possible. Staging and selling a smart home means knowing exactly what the technology is and how it works, so that buyers can see just how they would benefit. If the advantages can not be clearly communicated, the costs will not seem worth it.
Millennials Tend to Buy Homes Later Than Their Parents
While millennials are eager to become homeowners, they also recognize that the housing market is not what it was when their parents purchased their first homes. Millennials spend nearly $93,000 in rent by the time they are 30. That is over $10,000 more than Generation X and more than $21,000 more than baby boomers, after adjustments for inflation.
A major reason for the increased time in renting is due to those higher housing prices noted earlier. Many millennials rent while trying to save money for a down payment, which draws out the time needed to save enough, and leads them to purchase homes later than their parents and grandparents.
Additionally, many of today’s millennials marry later than their parents, so they may be trying to come up with the down payment on their first home as a single adult, or even delaying the purchase until they have a life partner or family. Millennials also want to be settled into a career and pay down student debt before purchasing a home, further delaying the whole process.
Millennials Shop Around for the Best Prices
Because millennials want more home for less money, some spend significant time and resources to shop around for the best prices and rates when purchasing a home. Some millennials are willing, for example, to sacrifice a high-end experience to save on realty costs, choosing real estate agents who charge less in commission at the cost of lower involvement. You typically get what you pay for so ensure the savings outweigh any negative effects that may manifest before signing any documentation.
Also, finding a low interest rate on a mortgage is essential for many millennial buyers. They are typically more willing to shop around to find the lowest interest rates or have various lenders compete to get the lowest rate, even if it adds some time to the process. When rates are comparable, going with a local lender can often help keep the loan process on track, and provides an avenue to discuss issues in person in lieu of via the phone, email, or snail mail.
Additionally, more millennials than Gen X or boomer buyers are willing to buy “fixer-uppers” and then work to update or remodel the home. While there are inherent risks in taking on a fixer-upper, it is becoming more common for new home buyers to take on these types of homes to stretch their budgets a little further, especially in neighborhoods that might otherwise be prohibitively expensive.
Millennials Have Different Priorities
Condos and townhomes are more common today than they were 20 years ago, and millennials looking to purchase a home are more drawn to these options, often because they are more affordable. Similarly, these home types are often in convenient locations, like downtown, near parks, or by major highways. These are often perks for the millennial generation, which is more likely to prioritize recreation, social life, and shorter commute times.
Millennials on the whole are highly focused on location. They may be willing to live in the suburbs or the city, as long as they can be near to the things that are important to them. Some factors for this include a desire to be closer to work, a more vibrant social scene, and more entertainment options. Access to connectivity is also huge as some millennials will turn down a property if they can not get a steady internet connection or phone signal.
That is not to say that millennials do not care about any of the factors that previous generations valued. But the order of priorities and the reasons behind them may differ substantially. Therefore, it is crucial that agents be able to pivot around those differences as they arise.
It Matters Who Takes The Pictures Of The Property
Long gone are the days when the only marketing was putting a sign in the yard and hoping a buyer sees it and stops to view the property. It is also not wise to take photos that are not crystal clear and show the best features of the home. Nowadays it is wise to put forth the effort and have a professional photographer take shots of your home if you want it to get noticed and stand out.
Millennials expect to see the best possible versions of the properties they are considering before coming to preview the house, so attention to detail with your photography (lighting, light staging, etc.) is a smart move. It is also a good idea to use drone technology to show the topography and outside details of the home, land, and surrounding area.
What you do not want to do is employ trickery and edit the photos to make your home look better or bigger than it actually is. There are fewer ways to quickly lose credibility with buyers. Promote your property honestly and let potential buyers see the home for what it is.
What Real Estate Agents Can Do
Whether or not you regularly deal with a millennial clientele now, you will soon. While boomers have long been the biggest living generation, millennials are set to pass them this year. That means that they represent a huge purchasing potential, especially as time goes on. So these different buying habits are not something to ignore, even if the approach goes against your style or preference.
To really cater to millennials, real estate agents need to meet them where they are. Learn the technologies they like (such as social media), and bring it into your process. Set up a texting platform, give your website a facelift, and do anything you can to bring your services to a place where your younger buyers will feel more comfortable.
Once you have set up a foundation for reaching those buyers, focus on addressing their needs and worries. Be cognizant of budgets, locations, and the availability of important amenities. If you are not ready or willing to make changes, they will move on to more progressive agents who understand the importance technology plays in purchasing and selling a home.
Final Thoughts On Millennial Buyers
Every generation has its perks and characteristics, and markets must keep up with the evolving tastes and needs of their consumers to thrive. Millennials are the current trendsetters when it comes to a big portion of consumer goods, and that includes big purchases like real estate.
Millennials have just started dipping their toes into the real estate market, and they have already had a big influence, and that influence is more than just a passing fad. Many of the trends listed here will likely continue as later generations enter the housing market, so keeping a perspective on all that they have added to the industry is important. The heightened reliance on technology alone has made searching for and purchasing homes more efficient and seamless for all parties involved.
Other generations can only envy millennials for being informed and well-aware of what they want. Many would say that it is because they grew up during the boom of Internet technologies, but it is actually due to their knowledge of how to use these technological improvements in everyday life that they are so savvy about almost every aspect of their lives.
They are smart and savvy which means homeowners and agents must adapt their approach and style to keep up. In the end, sellers will have a better product (a well maintained and updated home) to show which is great for market growth. With the iGeneration (Z’s) next on the real estate horizon, we all must continue to evolve, or run the risk of getting left behind.
Additional Millennial Real Estate Resources
Key Millennial Market News via the NAR
Top Real Estate Buyer Resources at list.ly
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