Millennial Home Buying Trends: Wait, Skip the Starter Home?
There is a common misconception that millennials are not interested in buying homes. The truth is that millennials simply approach home buying differently from previous generations and at a different stage or age in life.
Skipping the “Starter Home”
Millennials (people aged 18-34) are skipping the common “starter home”. One reason for this trend among millennials is that many are choosing to marry and start families at older ages than many previous generations. Getting married and having children is a common driver for first-time home purchases, by putting off those life milestones, millennials naturally put off buying a home as well. Another reason supporting this trend is the lack of starter home inventory available for sale compared to number of buyers in the current real estate market. Competition is fierce for lower and mid-range priced homes and the shortage isn’t expected to end anytime soon. With the rising home values, builders are focusing on larger more expensive homes to make more off of each building project. This means the new construction homes coming to market are in a higher price category than the average “starter home”. Millennials see this dynamic and are renting longer and skipping over the starter home.
Bigger and Pricier First-Time Home Buys
By skipping the starter home, when millennials do buy a home, they are buying larger and more expensive homes as first-time home buyers than prior generations. Renting for a longer period of time gives millennials more time to save up enough for a down payment on the home they really want, rather than settling for a starter home. Millennials are also leveraging financial gifts from parents and other family toward their down payment more than home buyers who have come before them. By saving longer and leveraging financial gifts, millennials better position themselves to have adequate down payment for larger and more expensive homes.
Millennials are actually the largest group of home buyers in the market, contrary to the mistaken belief that they just aren’t interested in home ownership. Millennials simply approach home buying differently by delaying until they can afford the size and type of home they want, rather than settling.