It is no secret that the Millennial generation, the largest generation in American history, is changing the structure of the real estate market.
The National Association of Realtors identifies Millennials as the largest most represented group when it comes to home buying. Millennials between the ages of 25 and 35 (older Millennials) have grown to represent 13.6% of the population and 35% of homebuyers (a 3 percent increase from 2015). Today, Millennials are letting go of renter lifestyle and are moving to home ownership, specifically of single-family properties. This is certainly an excellent investment opportunity for real estate investors across the nation.
Millennials’ Trends, Habits, and Characteristics in Today’s Real Estate Market
Because of their substantial effect on the real estate market, it is crucial for any savvy investor to be tracking Millennials. This includes the trends they’re following, the cities they’re moving to, their preferences, and characteristics.
Millennials are Seeking Homes in the Suburbs
Millennials have been known as a group that is constantly moving, a generation that spends more than they save, and one who prefers to stay in urban parts of cities. This may have been true once, but as any other generation, they are surging into a new life stage, and are changing their habits. Millennials are now getting married, having children, and looking to settle down and buy a home. The fact that Millenials were always thought of as renters is merely a generalization. It wasn’t a matter of if Millennials were to move to home ownership, it was a matter of when. And their time is now.
So why are Millennials moving to the suburbs? For one, soaring home prices have hindered Milennials’ ability to buy homes in city centers. Additionally, many Millennials feel like they need more space, especially if they’re starting a family. This isn’t to say that Millennials want to be isolated. In fact, many say they prefer to live in close-in suburbs, where they have access to the city and its amenities. Moreover, numerous Millennials state that they prefer to live close to their work place even if that means it’s away from the city. These, among other reasons, have caused buying in the center to decrease by 4% from 2014 to 2015. In general, this means that Millennials are following the footsteps of their parents and grandparents; a fact that can help investors make predictions for the future.
Top Cities Millennials are Moving to
The top real estate markets Millennials are moving into include Atlanta, Austin, Seattle, Denver, Houston, Boston, Cambridge, San Francisco, San Diego, Minneapolis, Memphis, and Pittsburgh. Millennials’ movement in the coming years will further change the structure and make up of real estate markets nationwide. So keep an eye out on these markets, they’re the next big investment.
Make sure to research the different real estate markets in these cities before you jump in and make an investment. You can find several blogs on our knowledge center exploring real estate market analysis in several of these cities. Additionally, you can research any city on Mashvisor and obtain information on over 40,000 properties. Our analytical investment tools will give you a breakdown of neighborhoods and properties alongside information on CoC return, cap and occupancy rates, rental income, and much more.
Things Millennials are Struggling With
- Affordability – Most Millennials will tell you they haven’t bought a home yet because they cannot afford it. Home prices have been on the rise in the majority of cities nationwide. This has made it difficult to Millennials among other buyers suffer from affordability constraints in the real estate market. Furthermore, the lag in construction in most cities has proved to be a challenge among Millennials searching for property. National inventory remains low at the same time Millennials are entering the real estate market.
- Student debt – Some Millennials choosing to pay off their student loans before considering purchasing a property. They admit that student debt is delaying their saving efforts and hindering their buying ability.
- Unemployment – While the unemployment rate among Millennials and US population in general has been its lowest since 2008, a significant number of young people still suffer from unemployment. According to Americans for Tax Reform, the unemployment rate for those aged 18 to 29 is approximately 8%, while those over 29 have an unemployment rate of 3.7%.
- Finding a suitable property – Many Millennials believe the biggest struggle is being able to find a proper property to meet their needs in today’s real estate market. If you’re a Millennial and you relate to this struggle, we’ve got good news. Using Mashvisor’s multiple investment tools and calculators will make your life ten times easier. Mashvisor not only will provide you with property listings and comps for every neighborhood and city you look into, it will also help you calculate property costs, and explore methods of payment. Your research for property has never been easier. So you can go ahead and cross “finding a suitable property” off your list of challenges!
- Not qualifying for a mortgage – While mortgage requirements have not been too difficult in recent years, mortgage applications for Millennials still get rejected occasionally. This means that even if they have found their dream home, Millennials cannot take the next steps to buy it.
A Few Tips for the Investor
To conclude our discussion, we’ll be providing the investor with a few tips in regards to Millennials in the real estate market.
If you’ve been in the real estate market for a while, prepare to change some of your investing and marketing methods. Millennials are different from traditional real estate market customers, and so are their needs and preferances. For example, Millennials like using social media and other instant messaging services. So even if it’s not your thing, text away! Millennials prefer it over phone calls for being more convenient, comfortable, and flexible. Try to accommodate their needs. Smartphones truly have become “an extension of the arm” when it comes to Millennials. So make sure to take advantage of that whether you are communicating with them, marketing your property, closing the sale, etc. Finally, understand that Millennials are flooding the home sharing economy. This includes services such as Airbnb. They’re gaining knowledge every day and may be very knowledgeable in regards to the real estate market. The bottom line? Be prepared for anything, and take advantage of this investment opportunity – Millennials are indeed a changing force in America.
Related: 8 Real Estate Market Trends in 2016