Recent market research conducted by Eyeonhousing.org suggested that 75 percent of Millennials want to buy single-family homes.
And although the same study showed that 79 percent of the Generation X population and 78 percent of Boomers also wanted to purchase single-family homes, other data collected by Forbes revealed the generational gap between homeownership.
Showcasing how only 32 percent of Millennials own a house, in comparison to the 60 percent of Generation X and 75 percent of Boomers, it’s clear that although Millennials have the aspirations to own a single-family home, there are factors that are delaying the process, such as social and economic trends.
High Rent and Student Debt Affecting Millennials’ Chance of Homeownership
There are two main burdens as to why many millennials are struggling to become a homeowner – high rent and student debt. For the latter, with reports indicating that it takes an average of 20 years to clear student loans, the possibility of putting a down payment on a home is unlikely.
For rent that exceeds more than 30 percent of your annual income, the possibility of saving a significant amount for a property also rapidly decreases.
As many Millennials tend to rent in a large city due to their work or social activities, the likelihood of affording a single-family home, whether it’s in the metro area or on the outskirts, inevitably declines.
With trends weighing heavily against Millennials, it’s fair to say that by the time they are seniors, the percentage of Millennials that are homeowners will be far lower than that of Boomers.
According to Redfin.com, recent home searches showed that:
- Single-family homes made up 33 percent of home searches, an 8 percent fall since 2012.
- 38 percent of searches for single-family homes were in more affordable areas, such as Las Vegas, but this was similarly down by 19 percent since 2012.
- 26 percent of searches for single-family homes were down 7 percent (from 33 to 26) in more expensive areas, such as San Francisco.
Location Affecting Price Premium for Single-Family Homes
Data collected showed that the price premium for single-family homes has “generally declined since 2013.” In the Redfin article, it showed how dramatically the price premium has been affected over the six years, showcasing how areas that were once considered more affordable, are now more expensive:
- Las Vegas: price premium rose by 7 percent from 10 percent to 17 percent.
- Birmingham: price premium rose by 14 percent from 15 percent to 29 percent.
- Tulsa: price premium rose by 15 percent from 12 percent to 27 percent.
- Houston: price premium rose from 9 percent to 19 percent.
For more expensive metros (e.g., LA and San Jose) the price premiums have decreased:
- San Jose down 6 percent from 31 percent to 25 percent.
- L.A. down 8 percent from 27 percent to 19 percent.
This is perhaps because many people that are looking to live in the higher populated cities are turning towards condos with a short commute. While the smaller and more affordable cities that offer larger single-family homes are increasing in price due to the aforementioned demand.
Popularity of Condos Declines
Although single-family homes are becoming more popular with all generations, condos and multifamily apartments are on the decline.
With statistics indicating that only 7 percent of Millennials now want condos, the market for single-family homes will continue to prosper in many areas across the U.S.
Despite many Millennials claiming that the size of the property isn’t as important as the location or commute to work, according to a 2019 NAHB report discussed on Redfin.com, they are looking for single-family homes with 2,407 square feet, in comparison to the 2,289 sq. ft by Generation x and 1,913 sq. ft by Boomers.
Redfin.com similarly found that:
- 28 percent of homebuyers put a priority on square footage when choosing a property.
From the research and data collated, it’s fair to say that the most likely reason why Millennials want a larger, single-family home rather than a condo or townhouse is due to wanting to start a family (6.2 percent associate the move with this).
The older generation, on the other hand, is opting for smaller single-family homes, as they want to downsize after their family has moved out.
Marriage is also a key predictor as to the need for owning a home. With research indicating that the probability of this desire reaching 18 percent, it’s clear that younger generations are wanting to put down roots before starting a family.
Millennials Look to Pay the Least for Square Footage
National Association Of Home Builders discovered that the following populations want brand new homes:
- Millennials: 41 percent
- Generation X: 28 percent
- Boomers 29 percent
- Seniors: 31 percent
Although Millennials are the largest demographic that wants newly built and existing homes, the report also reflected that they expect to pay the least per square foot:
- Millennials: $260,400 home purchase price, $108 per square foot.
- Generation X: $250,629 home purchase price, $109 per square foot.
- Boomers: $252,498 home purchase price, $131 per square foot.
- Seniors: $271,953 home purchase price, $145 per square foot.
Aligning with other information found in the survey, it shows that Millennials want a more affordable home with fewer amenities without sacrificing square footage.
Millennials Likely to Make Financial Sacrifices to Purchase a Home
According to a report by Zillow, younger homebuyers are more likely to make sacrifices, such as not purchasing appropriate healthcare or postponing a vacation in order to afford a home.
When comparing this to the 33 percent of Boomers and 57 percent of Generation X homeowners claim that they made a financial sacrifice, it’s clear that due to the economic climate and trends that Millennials are now facing, sacrifices are almost a given when saving for a home purchase.
The report found that financial sacrifices were made due to the following:
- 29 percent of Millennials overspend on their homes, compared to 22 percent of Boomers and 23 percent of Generation X.
- 33 percent of younger buyers bought properties based on aesthetics.
Desire for Single-Family Homes Stronger than for a Short Commute
Data in a 2019 Redfin survey shows that “90 percent of homebuyers would prefer a single-family home” compared to the 1 in 10 that want a condo within a short commute, showcasing the importance of more space within a larger property over proximity to work.
When broken down by region, the following was discovered:
- Cities with a population of over 1 million (e.g., New York and L.A.): 86 percent favored single-family homes over triplex apartments.
- Cities with a population between 500,000 and 1 million: 94 percent favored single-family homes over triplex apartments.
- Cities with a population with less than 500,000 residents: 91 percent favored single-family homes over triplex apartments.
Marimark Realty is a full-service real estate company in Tampa, Florida. Our focus is on providing a personalized experience for both buyers and sellers of residential and commercial properties, as well as investors.
To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.