Millennials like the suburbs after all
WASHINGTON – March 10, 2016 – A growing share of homebuyers are millennials, and more of them now purchase single-family homes outside urban areas, according to the 2016 National Association of Realtors® Home Buyer and Seller Generational Trends study, which evaluates generational differences of recent home buyers and sellers.
The survey, which is a free download, found that student loan debt is more prevalent among millennial buyers, but they aren't the generation with the largest student debt balances.
The share of millennials buying in an urban or central city area decreased to 17 percent (21 percent a year ago) in this year's survey, and fewer (10 percent) purchased a multifamily home compared to a year ago (15 percent). Overall, the majority of buyers in all generations prefers a single-family home in a suburban area – and the younger the buyer, the older the home they purchased.
"The median age of a millennial homebuyer is 30 years old, which typically is the time in life where one settles down to marry and raise a family," says Lawrence Yun, NAR chief economist. "Even if an urban setting is where (millennials) like to buy their first home, the need for more space at an affordable price is, for the most part, pushing their search farther out.
"Furthermore, limited inventory in millennials' price range, minimal entry-level condo construction and affordability pressures make buying in the city extremely difficult for most young households," Yun adds.
For the third straight year, millennials made up the largest group of recent buyers at 35 percent (32 percent in 2014) – more than younger and older boomers put together (31 percent). Generation X made up 26 percent of buyers, and the Silent Generation made up 9 percent.
Financing the purchase
While debt delayed saving for a downpayment for a median of four years for all buyers, the number of years postponed increased from three years for millennials to six years for older boomers.
Among the buyers who said "saving for a downpayment" was the most difficult task, millennials were most likely to note student debt (53 percent) as the primary cause, while Gen X (44 percent) and younger boomers (36 percent) cited credit card debt.
According to Yun, student debt probably impacts more than just the millennials.
"Whether it's from financing their own education or borrowed for their children, it's somewhat surprising to see a higher median amount of student debt among Gen X ($28,000) and younger boomer buyers ($29,100) compared to millennials ($25,000)," Yun says. "One of the many reasons housing supply has been subdued in recent years may be because a segment of homeowners have decided to delay trading up or moving down in order to pay down their debt, including from student loans."
The study found that more homebuyers are relying on financing – 86 percent compared to 88 percent a year earlier. Younger buyers who financed most often relied on savings for their downpayment, and older buyers tended to use proceeds from the sale of a primary residence.
Overall, the median downpayment ranged from 7 percent for millennial buyers to 21 percent for older boomers and the Silent Generation. Nearly a quarter (23 percent) of millennials cited a gift from a relative or friend – typically their parents – as a source of their downpayment.
Characteristics of buyers
Millennial homebuyers median income this year was $77,400 ($76,900 in 2014), and they typically bought a 1,720-square foot home costing $187,400 ($180,900 a year ago). The typical Gen X buyer was 42 years old, had a median income of $104,700 ($104,600 a year ago) and typically purchased the largest home compared to other generations (2,200-square feet), at a cost of $263,200 ($250,000 last year).
Generation X buyers (71 percent) were the most likely to be married, younger boomers had the highest share of single female buyers (20 percent), and 12 percent of millennial buyers were unmarried couples.
The millennial generation's primary reason to buy? They want a home of their own, according to 48 percent (39 percent a year ago). The desire for a larger home was highest among Gen X buyers (16 percent), and older boomers (20 percent) were most likely to buy because of retirement.
Searching for and buying a home
Nearly all buyers predominantly used the Internet and a real estate agent during the home search process: 87 percent of millennials and Gen X buyers used an agent and were also the most likely to use mobile or tablet applications and mobile or tablet search engines during their search. Gen X buyers were the most likely to visit an open house.
"Supply shortages, strong competition and rising home prices in today's market can make buying a home very stressful," says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. "While the Internet is the initial go-to destination to search for available listings, consumers want the expertise and insights of a Realtor to help them find the right home within their budget."
Gen X buyers represented the largest share of single-family homebuyers at 89 percent (85 percent a year ago), and younger boomers were most likely to purchase a townhouse or row house (9 percent). A combined 3 percent of millennial buyers bought an apartment, condo or duplex in a building with two or more units (7 percent a year ago).
Neighborhood quality had the strongest influence on millennials in their home selection (63 percent) and convenience to jobs (60 percent). Gen X south convenience to schools, and the Silent Generation wants proximity to friends and family.
Characteristics of sellers
Those more likely to be trading up (Gen X homeowners, 25 percent) or trading down (older boomers, 24 percent) represented the largest share of sellers in the past year. Millennials – also likely to be move-up buyers – stayed in their home the shortest amount of time before selling (five years).
Even though younger sellers were more likely to need a larger home or move because of a job, older boomers were far more likely to move farther away. Sellers overall moved a median distance of 20 miles, but older boomers traveling farthest: 75 miles.
Across every generation, sellers overwhelmingly used a real estate agent or broker to sell their home (88 percent or higher). Younger sellers largely wanted an agent to help price their home competitively or sell within a specific timeframe; but "help finding a buyer" was a top reason for younger and older boomers.
In July 2015, NAR mailed out a 128-question survey using a random sample weighted to be representative of sales on a geographic basis to 94,971 recent homebuyers. The recent homebuyers had to have purchased a primary residence home between July 2014 and June 2015.© 2016 Florida Realtors®