Although the millennial generation has developed a reputation of being less motivated than previous generations (some seemingly content to live in their parents’ homes indefinitely), it turns out that they’re beginning to think about their futures more seriously.
According to one survey, the number of first-time home buyers between 2016 and 2017 has risen from 33% to 52%! More importantly, of that 52% of home buyers, 60% are millennials. With their futures unfolding before them, they are starting to shift their priorities and expectations as they prepare to buy their first homes.
With that in mind, let’s go over the millennial demographic and why they are an ideal customer segment for builders.
Why millennials are the ideal customer segment for new home builders
Metro areas are becoming too expensive for them.
For many millennials, the prospect of moving to a larger city such as Los Angeles, San Francisco, and New York has had a huge draw because of the accessibility to popular entertainment and nightlife venues, trendy restaurants and cultural interests.
But with home and apartment prices skyrocketing in major cities like these, they’re beginning to look to the suburbs due to the lower cost of living. In fact, according to the Urban Land Institute study, the rate of millennial homebuyers in urban locations has dropped significantly from 21% in 2015 to 15% in 2017!
With housing (and renting) affordability in metropolitan areas becoming more of an issue, the demand for suburban homes is rising. That increased demand, mixed with the fact that millennials are entering their prime spending years, makes them a perfect demographic for builders to work with moving forward.
They’re ready to settle down
As millennials begin to think about their future, the idyllic and traditional lifestyle is increasingly more appealing to them.
The desire to purchase a new home is now a priority for millennials for several reasons, including:
- They’re finding better-paying jobs that allow them to afford mortgage payments
- They are starting (or growing) families, with 49% of millennial buyers having at least one child, and the number of adults in cohabitating relationships up 29% in the last decade
- They want to live in a quieter, more peaceful neighborhood
- They’re ready to invest in their future and in real estate as a means to build equity
- They want more space for pets, offices, etc.
As you can see, their needs and tastes are changing—essentially, they want more for their future and this is reflected in their eagerness to purchase a home.
While the millennial generation has developed during a time of rapid advancement in technology, they have also witnessed severe economic disruptions, such as the housing crisis that may have negatively affected their parents (and many others). As a result, their attitudes toward moving out, marriage and even homeownership were impacted.
But things are looking up for this generation, according to Doug Duncan, senior vice president and chief economist at Fannie Mae, stating, “Millennials showed especially strong increases in job confidence and income gains, a necessary precursor for increased housing demand from first-time homebuyers.”
As millennials continue to move out from their parents’ homes, migrate to the suburbs, start families, and earn incomes that allow them to work past financial constraints (such as student loans and other debt), the demand for new homes is rising.
In other words, the door is wide open this year for builders to prepare for and appeal to this generation and their housing needs. If you want to be at the forefront of this housing market resurgence, the time to act is now!
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