A new study by Clever Real Estate finds that certain assumptions about millennial homebuyers deserve closer look. The survey polled 1,000 American homebuyers who indicated they wanted to purchase a home in the next year, 51% of whom were millennials.
While many think millennials aren’t buying homes because they’re too busy eating avocado toast, the reality is they’re saddled with more student loan debt and less pay than previous generations. But that doesn’t mean they don’t buy into the American dream of eventually owning a house of their own.
What Millennial Homebuyers Want
79% of millennials surveyed were first-time homebuyers. They haven’t been through the homebuying process before and need help wherever they can get it. 62% said they would use a real estate agent, while many others would use a combination of online tools like Zillow and Redfin along with a traditional Realtor. 63% of millennial respondents said their phones are their primary research tool when looking for homes.
Somewhat surprisingly, these younger buyers value safe neighborhoods and good schools (the suburbs) over walkability and short commutes (the city), defying expectations.
Due to the high cost of homes, millennials are ready to take on a fixer upper, even if it needs major repairs. They’ll put in the work to get their piece of the American dream, even when it doesn’t make sense for them financially.
According a recent Home Advisor report, the average cost to remodel a bathroom in 2018 was $9,742, while a kitchen was a staggering $22,145.
Millennials saddled with student loans and credit card debt who are struggling to save enough for a down payment should think twice before investing in a home in need of immediate structural repairs that can’t be lived in immediately.
The small percentage of millennials who aren’t first-time homebuyers are likely more experienced in the real estate market, going in for their second purchase or perhaps investing in real estate. Many millennials believe that real estate is a good investment and for those who can afford it, they’re putting their money there.
Barriers to Home Ownership
There are many barriers preventing millennials from accessing home ownership. Between credit score requirements, costly down payments, rising home prices. and interest rates, for some home ownership seems truly impossible.
In Clever’s study, 36% of millennials said saving for a down payment was their biggest impediment, while 22% attributed their reluctance to high home prices. Others said they held off on purchasing homes due to fear of being tied down or because of credit-related issues. They might not know about first-time homebuyer programs that offer lower down payments than the traditional 20%.
What Millennials Are Looking for in an Agent
For the large majority of millennials who do want to work with a licensed real estate agent, they want someone they can trust. 46% of respondents said they’re looking for trustworthiness, while 25% prioritized knowledgeability.
Most of these homebuyers haven’t purchased a home before, and they want someone who can do more than just show them the best looking houses in the neighborhood. Millennials want someone who can guide them through the complicated real estate process — and make sure they come away with a good deal, too.
How Millennials Are Making Their Homes Work for Them
Despite all the obstacles to home ownership, millennials are purchasing homes across the United States at high rates. But they’re not just living in them — they’re using them to generate supplemental, passive income as well…
Utilizing rental platforms like Airbnb, HomeAway, and VRBO, they’re making money from renting out spare rooms, vacation homes, or even their whole property. Some are even “house-hacking,” which is purchasing a multi-family home to live in one of the housing units and then renting out the other units to tenants.
Whether millennials are purchasing their first single-family homes or multi-family properties, the point is that they’re thinking of it as a savvy investment. When surveyed about why they wanted to purchase a new home, the number one reason was the need for more space (54%), but 43% also cited it as a sound investment. Others still wanted more privacy or thought it could be more affordable than renting.
According to the survey, millennials are 52% more likely than Baby Boomers and Gen X-ers to invest in a multi-family property, and 9% of respondents said they were interested in renting out new properties for passive income, with the eventual goal of financial independence.
For many, this approach can be a means for overcoming obstacles to home ownership — the additional income can be used to pay down debt and monthly bills, such as the mortgage, utilities, or repairs.
It may not be easy to buy a home in 2019, but with creative strategies, it might be possible for millennials to purchase homes in even greater numbers.
This article has been contributed by our friends at Clever Real Estate.
