Millennials are not interested in the permanent commitment of a mortgage; millennials are facing huge amounts of student loan debt that makes buying a home impossible; millennials have seen older generations burned by home ownership and want no part of it.
These are the common rationales that attempt to explain the fact that home buying on the part of millennials is down in comparison to previous generations at the same ages. These rationales go on to say that millennials want to be free of obligations and would rather live in a cool apartment in an urban area that allows a great lifestyle and mobility.
Several surveys in the past couple of years indicate that the rationales above do not really hold true. Some surveys report that millennials would actually love to own their own homes. So, the idea that they want to be “free” of obligations may not actually hold true.
So, what is the Real Reason?
The reason for home ownership among millennials being at a historic low has everything to do with marriage. Millennials are simply getting married at older ages. According to a Zillow survey, millennial couples who are married and with two incomes are buying homes at a rate close to historic norms. But, because more millennials are getting married much later, the generation as a whole is way behind in home ownership.
Between 1960 and 2011, the average age of marriage went up by six years for both sexes. And once the 2088 financial meltdown hit, marriage was put off even further, as college grads had a tougher time finding career employment with decent salaries.
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Later marriage means later home buying, so it is certainly possible that this generation will eventually purchase at the same rate as previous generations. And the generation that follows, according to another survey, believes that home ownership is a key factor in achieving the American Dream.
Where Millennials Want to Buy
Here is another stereotypical assumption that may not, in fact, be totally true. It is assumed that married millennials want a “cool” house in an urban area, and gentrification of old neighborhoods in urban areas is a real thing. Young millennials couples are “into” gentrification, evidence shows, until they begin a family. Once the kids begin to come, millennials look for housing in suburban areas. And in many attractive urban areas, such as San Francisco, Atlanta, and even New York, life is expensive, and even more so when children come along. In general, tough, millennials who decide to have children are far more likely to buy homes in the suburbs than those who choose not to have families.
What Millennials Value in Housing Environments
While the evidence suggests that millennial families are moving to suburban areas, they do have certain criteria. And that criteria includes convenience that is important to their lifestyles. Can they walk to the park and to a Starbucks?
Builders are responding to these demands by constructing “mini cities” in suburban areas – large housing developments with small shopping areas, pools, clubhouses, and fitness centers, libraries, and even shuttle busses to transport kids and adults throughout the neighborhoods. These neighborhoods provide the convenience and accessibility that millennials crave.
Quick Turnarounds are the New Norm
Millennials are not “wedded” to companies they go to work for, and they should not be. Those companies are often not “wedded” to them either. Recent employment studies who that millennials change jobs often, as often as 1 ½ to 2 years, and such changes often mean changes in geography.
So, if millennials purchase homes, they are often looking for a quick turnover with the potential to make a profit and move on. They are not into a mortgage or a home for the long haul.
Millennial Financial Situations Demand New Mortgage Products
Coming up with a down payment is tough for millennials. Chances are, both partners in a marriage have student debt, and that can mount up to well over $50,000 between the two of them.
In response, many mortgage lenders have come up with new loan packages with far lower down payment requirements, and millennials are taking advantage of them.
Millennials are Tech-Savvy Buyers
Here’s the thing about millennials. They have grown up with their devices; they are experts at researching anything to find what they need. In college, they used their devices smartly, to conduct research, to find academic help they needed, and to organize their lives. They count on their connectivity for everything.
Millennials shun the use of real estate agents to look for a home. With Zillow, and other sites like them, the search for homes and for mortgages is increasingly becoming digital, as opposed to physical. This has forced realtors and real estate companies to design apps for this “on the go” generation. They search without personal help.
The same goes for mortgage lenders. To remain relevant, they must offer online qualification and application, and they must process and underwrite loan applications quickly. Failing to do so simply means borrowers will go elsewhere.
Disruption of an Industry
Technology has disrupted a number of industries, and the real estate and mortgage niches are no different. Millennials will buy houses as they age, but they will buy them differently. Builders, real estate professionals, and mortgage lenders need to take heed if they are to survive.