The long-running narrative on Millennials has been that they are living in their parent’s basements, too crippled by debt and low-paying jobs to afford to live on their own. Quickly, though, that story is changing. In fact, Millennials have had the highest share of home buying for the past 5 years, and in 2017 accounted for 36% of purchases, according to the National Association of Realtors (NAR).
What’s driving the change? Well, now that Millennials are growing older, their expected salaries are beginning to increase and their debt load doesn’t seem as overwhelming. And after living with their parents or choosing to rent on the cheap for a few years, they have some money saved. They’re also starting to form families and need additional space. And finally, Millennials are more likely than other generations to view buying a home as a good investment.
Still, the current housing market isn’t making it easy for buyers, no matter their age. Starter homes are scarce across the country. Trulia estimates a 14% decrease in starter homes during the first quarter of 2018 compared to the year prior. So the choice is to keep renting or find higher-priced options.
So far in 2017-18, the choice has been to increase their willingness to pay. Nearly one-third of Millennials' purchases were for homes above $300,000, according to NAR. And larger home size doesn’t even seem to be the driving factor. Location and amenities are often cited as the two biggest criteria for purchase decisions. They want their homes close to attractions and move-in ready. This follows a similar pattern across every age spectrum.
And where can they find and afford these new homes? Millennials, in many ways, are driving the boom in popular Southern destinations. There they can find homes that are lower priced than California and New York, with growing cities nearby.
All of this reinforces that new construction is a necessity (especially starter homes) and that renovations will continue to become more popular, as buyers look for homes that are move-in ready.
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Note: This post originally appeared on the Built Technologies blog in May, 2018.