The autumn market has remained robust. Our strong market is partly a result of high demand from homebuyers, many of which are members of the Millennial generation – people between the ages of 18 and 34. So much has been written about Millennials, and so much of what has been written is simply conjecture. This month we’ll take a closer look at Millennials and their opinions about real estate. We will dispel some of the myths about Millennials, but first a quick review of last month’s market data.
In San Mateo County, sales volume decreased slightly by 4.3% on a year-over-year basis in October, and was decreased 9.3% month-over-month, in line with the typical fall slow down. The supply of available homes stayed fairly steady going from 1.4 in September to 1.3 months in October.
Because they are the largest generation, even bigger than the Baby Boomers, and they are just entering the prime home buying phases of life, Millennials and their actions will play a critical role in the housing market for decades to come. So what do Millennials really think about real estate and what are some common myths?
Myth #1- Millennials don’t want to own homes
Those who are propagating this myth apparently forgot to actually ask Millennials how they felt about purchasing and owning real estate. Fortunately a few people did ask. An extensive survey conducted by Zillow found that 67% of Millennials believe that “owning a home is necessary to live the good life.” That percentage was higher than any other generation surveyed. Perhaps even more interesting, 75% of Millennials feel that “owning a home provides a person more freedom.”
Despite the speculation of pundits, the dream of home ownership is apparently as attractive as ever among Millennials.
Myth #2 – Millennials aren’t able to buy homes
The reality is that many Millennials are not only able to buy homes, they are active in the market and no doubt closing on homes as you read this. The Harvard Center for Housing Studies recently estimated that that about 50 percent of the 25- to 34-year-old renters in the top 85 metropolitan areas have the income and credit scores to qualify for a mortgage today.
That said, Millennials have faced some economic headwinds. The biggest headwind of course was the Great Recession and the relatively slow recovery in its aftermath. Home buying is still dictated by jobs to a large extent, and only in the past couple of years have we seen robust job creation.
Furthermore, like all previous generations, the biggest hurdle to home ownership is saving up the down payment. Surveys have shown that a majority of Millennials believe you have to put 20% down. Fortunately, this is not accurate, so there may be an opportunity to better educate Millennials about their options.
Lastly, much has been written about the burden of student loan debt holding Millennials back. No doubt, student loan payments make it harder to save for a down payment. However, a TransUnion study found that “student loan obligations do not inhibit younger consumers’ ability to access and repay other consumer credit categories, such as a mortgage, compared to peers without student loans.”
It appears that too many Millennials may believe the myth themselves that they can’t afford to buy a home, when in fact they can.
Myth #3 – Millennials don’t think homes are a good investment
Millennials were mostly bystanders as home prices plummeted during the post-bubble correction, but they had a front row seat, and as a result, the hypothesis is that Millennials view real estate as a bad investment. Again, let’s see what Millennials, not the prognosticators, think.
In what may be the most surprising result of all, the Zillow survey found that 65% of Millennials believe that “owning a home is the best long-term investment a person can make.” Millennials were even more bullish on real estate than the Baby Boomers, who came in at 64% on the same question.
Conclusion: like previous generations, Millennials recognize that home ownership is a viable path to prosperity, and those who find a way to purchase real estate early in life often set themselves on a trajectory to financial well being. So rather than reading about what they are supposed to be thinking, Millennials are busy buying real estate in increasing numbers.
On a personal note, I find it deeply rewarding to help people purchase a home for the first time, whether they are Millennials or seniors. And with Thanksgiving just around the corner, I am thankful for the opportunity to help my clients realize the American dream of home ownership. Have a wonderful Thanksgiving!