Millennials are a generation of significant income inequality. Wealthy, college-educated millennials who have had a chance to pay down their student loan debt or were able to not have student loan debt comprise most of the millennials who now own homes. However, millennials without a college degree have 19% less family wealth than previous generations and Black millennials have 52% less family wealth than previous generations had at the same age.
This economic inequality means that those who can afford to purchase homes are doing so, and those who can't continue to rent, which will further exacerbate income inequality in the coming years.
Investment companies are increasingly buying up and renting out starter homes. This leaves millennials buying more expensive first homes than previous generations did. As a tech-savvy generation, millennials have changed much of the homebuying process over the past decades.
- A generational shift in homebuying is underway, with millennials beginning to purchase residential real estate.
- Technology plays a big part in millennial house-hunting, with this generation turning to mobile devices to search, view properties, and communicate with real estate agents.
- With fewer starter homes available, millennials are increasingly buying nicer first homes than previous generations did.
- During the COVID-19 pandemic, as home showings went solely online, millennials were among the groups buying properties.
- Millennials as a group tend to prefer to live close to their jobs.
Millennials are dedicated to their devices, and for this demographic group, technology plays a central role in homebuying. According to the National Association of Realtors (NAR), 99% of millennials search online to get general-purpose information about the housing market and homebuying.
Millennials are also around twice as likely to use their mobile devices in their search than older baby boomers are. Over half of millennials (59%) said they would be at least somewhat confident making an offer on a home they toured virtually, while 39% reported they would be comfortable buying a home online. Over 80% of millennials would like to view 3D virtual tours and digital floor plans when shopping for a home, according to a 2021 report from Zillow.
Digital advances have transformed real estate marketing, Steven Gottlieb, an agent with Coldwell Banker Warburg. "In the earlier days of online property marketing, we'd grab a digital camera and take the photos ourselves," Gottlieb said. "Today, virtual or traditional staging with professional photography is commonplace to make homes pop on online marketplaces next to thousands of competing listings." What's more, he added, agents who don't do some staging or use a professional are doing sellers a disservice.
The percentage of homebuyers who were millennials in 2021.
Communicating With Realtors
Millennials also differ from previous generations in terms of how they use tech to communicate with Realtors. "They prefer the majority of communication to be via text message," said Jill Hussar, a broker-owner at Hussar Real Estate in Lakewood Ranch, Fla.
Hussar reported that millennials use text messages to express interest in a property, schedule appointments, and ask questions, while phone calls are usually reserved only for more urgent or pressing concerns. Texting represents the most immediate back-and-forth line of communication.
NAR research suggests that agents are adapting to this demand for electronic communication, with 90% of agents communicating via text and 94% using email. Another 34% chat with clients through instant messaging.
Another digital impact is in how agents list homes. Hussar said that tech-savvy millennials are leading agents and brokers to introduce features like livestreaming and video in lieu of traditional photographs. "Videos give the audience a broader view of the property, communication, and location," Hussar added, helping agents get in front of potential buyers and in particular, millennials.
Affordable Houses Close to Work
Millennials are the generation that is most likely to care about finding housing close to where they work: 44% of those questioned listed commuting costs as very important when considering where to live, while 74% listed a convenient location in terms of their job as an important factor when picking a neighborhood, and 58% listed overall affordability as important.
And almost half of millennial homeowners—47%—prefer to live in the suburbs as opposed to the big city or rural areas, online real estate company Zillow reports.
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Impact of Increasing Incomes
The desire for more deluxe digs reflects, in part, millennials' delay in entering the housing market. They have waited longer for a home of their own, and now they want a place where they can stay for a good long time. They can also finally afford it: college-educated millennials had median annual earnings of $56,000 in 2018, which was roughly equal to college-educated Generation X workers in 2001. What's more, they had a median household income of $71,400 in 2018, compared with $70,700 for Generation X households in 2001.
“Hardworking millennials, pulling in handsome salaries appear increasingly eager to self-validate by spending on cars, vacations, homes, and other material possessions,” said Gerard Splendore, a broker at Coldwell Banker Warburg. Must-have features include high-end appliances, landscaping, furnishings, finishes, and high-tech gadgets, he says.
The 2022 Investopedia Financial Literacy Survey found that although millennials are the most confident generation when it comes to financial literacy, they are also the most stressed. Those surveyed are facing significant pressure to make major financial decisions, such as homeownership, at an early stage of their life. Rising costs, particularly in healthcare, and financial inequalities have only added to this anxiety.
What Years Does the Millennial Generation Cover?
Millennials were born between 1981 and 1996.
Do Student Loans Prevent Millennials From Buying Homes?
Yes, student loans absolutely do prevent some millennials from buying homes. To get approved for a mortgage, a lender will look at your debt-to-income ratio. If you have a high student loan balance with a high monthly payment, then your ratio is higher, and your odds of approval for a mortgage decrease. Also, 51% of all student loan holders have said that their student loan debt delayed them from purchasing a home.
Are More Millennials Renters or Homeowners?
More millennials are renters than homeowners by far. Additionally, 18% of millennial renters say they plan to rent forever. That's the highest percentage of any generation.
Is Millennial Homeownership Keeping Up With That of Previous Generations?
No. At age 30, 42% of millennials own homes, compared with 48% of Gen Xers and 51% of baby boomers when they were 30.
The Bottom Line
Millennials have left a lasting impression on the housing market, and more changes may be on the way as this next generation of homebuyers enters the fray. Focusing on the positive impacts millennials have created is key to keeping that evolution in perspective. An emphasis on technology, for example, may result in a streamlined, more efficient homebuying process. And more millennials moving to the suburbs could help balance out the effects of rising housing prices in urban areas.
Gottlieb said the millennial desire for instant gratification in the housing market stems from growing up with social media. "They don't seem to want to take on renovations, even before the existence of current supply chain challenges. They'd rather move right in," he said. "This is causing a wider gap in price, value, and days on market between older properties—even if they have great bones—compared with new construction. Previous generations were more open to renovating an older property and seeing the potential in something that wasn't staged and professionally photographed.