Beyond the barbs about their weakness for avocado toast millennials have arguably endured more hardship than many. The generation born between 1981 and 1996 is now aged 25 to 40, and this demographic has already been treated to a housing bubble, a big rise in student debt and now a pandemic. With this last obstacle to overcome, it seems millennials have decided that enough is enough and its time to secure a stronger financial foothold. In 2021, were already seeing a surge in millennials buying houses. Lets take a deeper look at whats driving the change.
The pandemic effect
Faced with rising house prices, high student loan debt, eye-watering down payments and the shock-waves of the 2008 housing crash, many millennials had come to view home ownership as a fantasy rather than a rite. But the pandemic focused priorities. A 2020 survey revealed that the pandemic inspired half a million millennial homebuyers to accelerate their homebuying plans. Thats largely due to the overall shift towards working remotely, a crucial factor for 63 percent of those surveyed.
Millennials no longer have to restrict their search to expensive city properties and can consider more affordable suburban and rural housing instead. Financial prudence comes into play, too. Some 68 percent of those surveyed used shelter-in-place restrictions to cut down on travel and entertainment costs and build up savings.
Millennials are now the homebuying majority
There is strength in numbers. Millennials now constitute 38 percent of homebuyers in the U.S., making them the single largest demographic in the market. But their experience is vastly different to the generations before them. On the downside, 25 percent of millennials in one survey revealed that they have less than $1,000 in savings. Even those who have a nest egg often struggle to accumulate the $15,000 to $20,000 required for a down payment (although the 20-percent down payment is by no means the standard anymore). On the upside, millennials are more likely to be able to tap into financial assistance or inheritance from their family, and their parents happen to be affluent baby boomers, stereotyping aside. Growing up in the digital age, millennials are also more likely to be tech-savvy and thus able to secure high salaries, putting them in a strong position as homebuyers.
Leading the cultural shift
The realignment of the workplace and home due to the pandemic resonates with millennials preference for sustainability and space. From the outset, they want a property that is energy- efficient, environmentally sustainable and with room to raise a family. Thats a different narrative to spending a few cramped years in a tiny city apartment just to rise up the corporate ladder before escaping to the suburbs. Millennials are searching for homes in the suburbs and second cities right now. And theyre doing it differently, too, making full use of online and virtual resources to compile their wish lists.
Wealthy millennials can capitalize
Given the size of the demographic, there is significant disparity in wealth and income among millennials. By no means are all millennials buckling down to make the down payment. In fact, some 37 percent of millennials are looking for a home above the U.S. median price of $350,000. Instead of a starter home, theyre viewing high-end properties that are part tech hub and part eco-home. Whereas 10 or 20 years ago, tech-savvy talent might flock to New York City or Silicon Valley by instinct, post-pandemic remote working has made cities such as Austin, Dallas and Fort Worth (and their suburbs) more affordable but no less attractive alternatives.
The wider pandemic view
Theres a danger of assigning too much responsibility to the pandemic. Yes, it has triggered an exodus (if temporary) from New York, California and other traditional real estate hot spots, and it has made buyers take a second look at how much space they need in their home and local area. But the real catalyst remains affordable borrowing. With interest rates touching record lows of 2.8 percent in November 2020, the pandemic has coincided with an ideal window for those without equity (first-time buyers) to borrow large amounts without busting the budget. And right now, those buyers are millennials.