Why are millennials buying fewer homes than previous generations? Many factors from city living to student debt to later marriages could all contribute to the change in values causing this trend.
Home ownership is down among millennials, reports say.
The Urban Institute found that only 37 percent of millennials, people generally considered to be from their mid-twenties to mid-thirties, are owning homes. The Urban Institute said this is about 8 percentage points lower than when Gen Xers and Baby Boomers were the same age, the two generations preceding millennials.
The Census Bureau also revealed that between 2005 and 2017, the number of homeowners under age 35 decreased significantly.
Here is an overview of why this change could be happening and what home builders can do to better appeal to this generation.
Why millennials are buying fewer houses
The Urban Institute provided a list of factors that contribute to a decrease in homeownership in the millennial generation. These are as follows:
- Getting married and having children later in life. The report showed that marriage increases someone’s likelihood of owning a home by 18 percent, and having a child increases it by 6.2 percent. So, if these commitments are being delayed, so is home buying.
- More racial diversity than ever. Households that are Caucasian are more likely to own homes, so the more diverse population is bringing the numbers down.
- More student loan debt. This is a big factor in why millennials are avoiding or delaying buying a home, and it’s easy to understand why. Delaying big investments may seem like the natural way to get finances in order when you owe the government thousands of dollars already. The study indicated that if education debt increases by 1 percent, the likelihood of home ownership goes down 0.15 percent.
- Higher rent. If a household’s rent-to-income ratio increases by a percentage point, the chance of homeownership goes down 0.07 percent.
But another big reason could also be that this generation tends to flock toward big urban centers, where housing prices remain high.
One more thing to point out is that the housing market continues to slow in the U.S., and as Forbes says, this could be because of this young adult trend to avoid or at least delay home buying.
How home builders can adapt
There’s no one right answer to address a slowing housing market and slow-to-buy generations. But these solutions may help home builders get the upper hand in the millennial market.
First, millennials want homes with non-traditional layouts, the National Association of Home Builders says. The adults of this generation want their homes to better reflect who they are and what they care about, so unique and personalized features are important. They often want things that no one else has, and aren’t as interested in cooker-cutter housing developments.
With the popularization of reality television shows that center around home improvement or interior design, this generation expects design elements to make sense on a practical level while being Pinterest-worthy, all while remaining affordable.
Open concept plans are still popular, and it’s crucial to think about technology integration since this generation grew up with the Internet.
Smart home devices can be a great way to appeal to millennials. These devices not only offer ease of control for a variety of home functions from locks to cameras to voice activation, but they also provide environmentally friendly options. And millennials tend to be pretty eco and energy conscious. LED lights and smart temperature control systems are both popular ways to save on energy.
Since smartphone usage continues to abound with this generation, millennials want to be able to download an app and connect to their wearables or smart devices in an instant. So, home builders should integrate these new technologies as much as possible into new homes to appeal to this tech-heavy crowd.
Even though millennials may be delaying purchasing homes these days, there are still many ways home builders can appeal to this age group. Because student loan debt is large for them, they’re always looking for cost-efficient solutions. Integrating new technologies and energy-saving strategies will also help. And home builders should remember that these individuals like to stand out and have a personalized, unique feel to their spaces.
For more advice about home building tactics, get in touch with us at No Boundaries Advisors. We provide a variety of financial and strategic planning services to home builders and developers and would love to hear from you.
