After years of riding out the recession in their parents' basements, millennials are finally dipping their toes into the housing market. A growing economy, low mortgage interest rates, and reduced down payment requirements are helping to release pent-up demand in Generation Y—people born from the early 1980s to the late 1990s.
As builders, we need to know what our youngest consumers want. The NAHB conducted a survey asking millennials what home attributes are most likely to affect their purchasing decisions. The NAHB also examines home buying statistics to uncover trends and make projections, and it also evaluates other industry stakeholders' interpretations of Gen Y.
After rising for four consecutive years, the average size of new homes declined in 2014 and is expected to continue to decrease in 2015 as more buyers—especially millennials—enter the housing market and ask for smaller, more affordable residences. However, demand for single-family homes remains strong, with 75% of millennials preferring this type of home.
In another nod to frugality, young adults are looking for inexpensive decorating fixes like brightly painted doors and garden lights. They also want electronic features, such as programmable thermostats and energy-efficient appliances. Most millennials say they would pay 2% to 3% more for an energy-efficient home if they saw savings in their utility bills.
The NAHB survey found that the age group is willing to accept unfinished spaces in a home, but is not so open to using less-expensive materials. Millennials put a premium on amenities such as separate laundry rooms, exterior lighting, and storage (i.e., linen closets, walk-in pantries, and garages). They'll gladly live farther away from work and schools to afford a house with those features. They also would prefer a "low-maintenance" house, so a residence with a landscape that needs minimal watering and mowing would be ideal.
Where do these new homeowners want to live? Interestingly, 66% say they prefer the suburbs. While millennials often are considered urbanites, only 10% would opt to live in the center city. This is a larger percentage than older generations, but still small overall. Just shy of a quarter of millennial respondents said they would choose to live in rural areas; nearby park areas, walking trails, playgrounds, and swimming pools are huge perks for these consumers.
Just like previous generations, millennials see homeownership as a way to strengthen their households and own a piece of property. Although they entered the market later than expected, they are here to stay. A survey from the Demand Institute shows that over the next five years, 8.3 million new millennial households will form nationwide. The same survey found that 75% of respondents believe homeownership is an important long-term goal, and 73% consider it an excellent investment.
Put simply: millennials will play a role in how America's residences are built and financed. As builders, we will be responsible for building the places they will call home. It is essential that we know their preferences.