The housing bubble might have been one catalyst that contributed to the financial system imploding in 2008 which led to more than a million people losing their homes, but the American dream of homeownership is alive and well among Millennials, experts say.
With interest rates and home prices sitting at such low levels, now is a great time to buy a house, experts claim, because mortgage payments may be cheaper than what it would cost to rent a space—and Millennials are taking note. But it’s not their parents’ house that they are looking to move into.
According to a Better Homes and Gardens Real Estate (BHGRE) survey of 1,000 18 to 35-year-olds, this new generation of homebuyers is reinterpreting traditional norms, seeking customized purposeful homes to fit their values. Unlike previous generations, 77% of respondents prefer an “essential” home equipped with the technological capabilities they have grown accustomed to, as opposed to the stereotypical luxury homes preferred by many in their parents’ generation.
What’s more, 43% want their living quarters to be as unique as they are—more customized and less cookie cutter. More than half (56%) believe home tech capabilities are more important than “curb appeal”.
In fact, 84% believe technology is an absolute home essential, and 64% would not live in a home that was not up-to-date with the latest tech capabilities.
“The world has changed,” says BHGRE CEO Sherry Chris. Fine china is out, and dining rooms are converted into home offices and living rooms into media centers. Smartphones are used to turn the heat down or turn on outdoor lights and a security system.
What’s more, the survey says 59% would rather have extra space in their kitchen for a TV rather than a second oven, and 42% would be more likely to brag to a friend about a home automation system over a newly-renovated kitchen.
Their need for automation often ties in to their commitment to be ecologically sensible, says Marilyn Eiland co-owner of BHGRE Gary Greene, a real estate firm in Houston. Millennials are far more conscious of not being wasteful and will do what is necessary to save on the use of electricity and water: 57% of respondents say the most sought-after technology includes an energy-efficient washer and dryer.
While homeownership presents new maintenance responsibilities and surprises for first-time homeowners, Millennials are undaunted. The survey says 72% label themselves as “handy,” if not more so, than their parents.
Sweat equity allows them to modify a home to make it unique to their personality and family lifestyle,” says Keith Robinson chief operating officer of BHGRE Mason McDuffie.
Plus, a fixer upper makes good economic senses, explains Joe Rand managing partner and general counsel of BHGRE Rand Realty in Westchester, NY. Millennials recognize by paying $130,000 instead of $175,000 for a pristine home, they can save on the purchase price and still have money left over for improvements.
Price points do vary by area of the country. For example, Rand says $170,000 may be the median price, but first-timers may pay up to $320,000 to $370,000 in some areas. With just 5% down required for an FHA loan, buyers can bring $15,000 to $20,000 to a closing, making their mortgage payment about $1,200 a month, Rand says. “That’s what turns them into homebuyers.”
The current market also allows buyers interested in condos to purchase a 2,000-square-foot condo for $300,000 that used to sell for $400,000.
Townhouse and condos are increasingly available, says Jeremy Kingsley author of Inspired People Produce Results. These are more affordable than traditional homes and allow Millennials to “get out and grab a chunk of the pie,” fulfilling their need for a sense of accomplishment and getting them on track to a purposeful life journey.
Robinson says in the San Francisco bay area suburban condos are the main draw for young buyers and they are spending as much as $400,000 in San Francisco proper and a bit less in outlying areas like Oakland. “That’s a good entry price for 1,100 square feet with two bedrooms and one and one-half baths.”
Demand is high and supply is limited, and there are multiple offers on most properties, says Robinson. We are also seeing family members help, paying cash at full price. When the sale is complete, couples typically finance and reimburse their families. “In fact, 43% of transactions are all cash,” claims Robinson. “It’s something I’ve never before seen in my career.”
Living in the city is definitely a motivator for Millenials, adds Eiland. They don’t want long commutes and do want to be able to walk to restaurants—even if they have to compromise neighborhood or the age of a house.
“The [Millennials] have the spirit to create their own world,” Eiland says. If they move into an area with an inferior school district, they would be more inclined to stay there as their families grow and fix the schools—and believe they could accomplish this.
“Lifestyle and a strong sense of community are definitely what counts,” she says. “And location in Houston’s inner loop matters way more than a bright shiny new house in the suburbs that looks like everyone else’s.”