What Millennials Want / The Millennial Mindset

As the housing market prepares to accommodate the next wave of homebuyers, real estate agents should be attuned to the Millennial mindset. Bank of America Merrill Lynch conducted a survey of 1000 adults aged 20-34 across various U.S. cities to determine what Millennials (those born after 1980 through the mid/late 1990s) want.

• Home ownership is highly valued. 73% of survey respondents report that owning a home is either very important (56%) or important (17%) to them, signifying that Millennials possess a strong desire to own their own home, even if they do not own one yet.

• When purchasing a home, Millennials most value 1) price, 2) commute time to work, and 3) home size. The importance placed on other factors vary across demographics. For example, married Millennials value school district over restaurants and entertainment whereas the opposite is true for single Millennials. 

• Millennials prefer the suburbs over the city. 48% of respondents report that they currently live in a suburb and want to live there in the future or live in a city and want to move to a suburb in the future. Contrarily, only 31% of respondents said that they currently live in a city and wish to live in a city in the future or currently live in a suburb but want to move to city. 

• Millennials are minimally concerned about flexibility. While some may argue that a strong rental market means that people highly value the flexibility to move among cities, the majority (69%)  of survey respondents claimed that it was either not very important or only somewhat important to them. This flexibility is more important to single Millennials than married ones, with 35% and 25% citing flexibility as important or very important, respectively.

The Average American Home: Bigger than Ever

In America, you've probably heard the phase, "bigger is better." This philosophy is manifested in U.S. home sizes, which have steadily increased over time. According to the Census Bureau, the average home size grew from 1,725 square feet in 1983 to 2,598 square feet in 2013--an increase of 50%!

Many trends explain this phenomenon. First, the wealthily have gotten wealthier, and are buying bigger homes to show for it. The market for homes 4,000 square feet or more has increased from 6.6% in 2005 to 9% in 2013. Homes between 3,000 and 4,000 square feet have increased even more--from 15.6 % to 21.7% over the same time period. Director of Economic Services for the National Association of Home Builders Stephan Melman states that people who have invested in the stock market have seen their money double since 2009. 

On another note, first-time homebuyers are finding it more difficult to buy homes, thanks to student debt and trouble getting mortgages. Because first-time homebuyers make up the majority of the market for small homes, the market for such homes (1400 square feet and less) has decreased from 9% in 2005 to only 4% in 2013. The average first-time homebuyer in 2013 was 31 years old according the National Association of Realtors. 

Third, people are demanding more from their homes. Buyers want home offices, play rooms, walk-in closets and oversized bathrooms. Parents want their children to each have their own room. For many, a one car garage will no longer suffice. Therefore, alongside the increase in home size, the number of rooms in the average home is increasing as well.

Another trend that helps explain the increase in home size involves the current rental market. Rental rates have increased since 2006 by roughly 20%---turning many homeowners into landlords to order to help pay off home mortgages. People who move into a larger home are more inclined to hang on to their previous home as a rental given their low mortgage rates. Glenn Kelman, CEO of the brokerage firm Redfin, points out that every home converted into a rental means one less home on the market, contributing to low inventory and limited sales growth.

If you are interested in buying a home, be it small or large, contact me to see how I can help. I work for all types of buyers, from first-time homeowners to empty nesters. Click here to view my featured listings.