Millennials are infamous for changing social norms and for their irreverence, "killing" many staples of American life — diamonds, breakfast cereal, cable TV, etc. And now they're changing the face of first-time homeownership. Here are the biggest ways this new generation is changing homeownership:
1. Renting Longer
Student loans, a tough housing market, increasing cost of living that's quickly outpacing piecemeal salary increases... bluntly put, many Millennials simply do not have the money to own, per CityLab. Harvard University's Joint Center for Housing Studies recently published a working paper highlighting the numbers: a nearly 20% drop in volume of first-time homebuyers from 2.13 million in 1997 to 1.8 million in 2016. Instead of purchasing their first dwelling as early as previous generations, Millennials are opting out. They're either staying home with their parents to save or choosing to rent to avoid hidden costs of homeownership, according to Business Insider.
2. Avoiding Starter Homes & McMansions
Millennials are not only changing the rates of first-time homeownership, but they're also forging their path in choosing different kinds of homes. According to another Business Insider article, the starter home is one example. Millennials who move back in with mom and dad to save money increasingly opt to skip starter homes altogether and go directly to a single-family home for a few reasons. First, they're typically older and less likely to move around. If they live in an expensive urban area like San Francisco, they may continue to rent in the city and buy a vacation home a few hours away. And by the time they are finally ready to buy, they're sometimes making enough to afford something more luxurious.
You might think that would bode well for McMansions, but they're still out of reach financially for most Millennials. And even for those who can afford them, McMansions don't meet the evolving needs or desires of this generation. As CNBC highlights, Boomers are increasingly worried about making back the money they paid for their homes as both demand and prices dip below what they paid for them. Large houses and yards don't matter as much to this younger generation.
3. Favoring Minimalist Homes & Short Commutes
So what do Millennials value and what does it mean for their dwellings? Many are too busy, making maximizing free time key. Improving the length and comfort of their commute by choosing a neighborhood near public transit or work opportunities, for example. Their commute becomes a chance to read email on the bus or light rail instead of waiting in bumper to bumper traffic. According to Business Insider, they also prefer open floor plans, "minimalist, low-maintenance designs and sleek, discreet appliances" which cut down on home maintenance, freeing up time for other pursuits. Speaking of other pursuits, the "walkability" of a neighborhood is also essential to Millennials. Having grocery stores and entertainment within walking distance goes a long way in improving quality of life.
4. Forming New Households When They Buy
Today's first-time homebuyers are also getting creative with living arrangements. Previous generations largely purchased their first home with a spouse, while Millennials are forming new households when they buy — by either moving in with a housemate who pays rent to help pay for the mortgage or buying with a partner before getting married, explains Business Insider. While Boomers and the Silent Generation typically bought their first home as a result of marriage, Millennials are once again showing their diverging values by prioritizing this major purchase over a wedding. While they're waiting longer to get hitched, the high cost of homeownership and everyday expenses, including health insurance, make splitting a mortgage that much more enticing.
Millennials are coming of home-buying age under different circumstances than previous generations, making for some meaningful changes in real estate trends. Tell us about your first-time home buying experience as a Millennial (or those of the new homeowners in your life). Did the trends above hold true?