The obsession over millennial home purchasing habits is warranted, as the numbers show that Generation Y won’t be buying in great numbers
Predicting whether millennials are finally going to start buying homes in large numbers has become a seasonal sporting event for real estate experts; but they've been held back by housing price increases that outpace wage hikes, not to mention limited access to credit, and rising rents that make it harder to save for a down payment.
Millennials will make up the largest share of homebuyers next year, but that should come as no surprise, as historically the largest share of U.S. homebuyers have been between 25 and 34 years old. They will buy one out of three homes in 2016, predicts Jonathan Smoke, chief economist for Realtor.com, a small uptick from this year.
“Essentially, the biggest winners of the generation are purchasing homes,” said Smoke, who published survey results earlier this year showing that pay raises were the biggest catalyst for millennials buying homes. “I’ve heard anecdotally from national builders that they’re seeing millennials skipping over the idea of the traditional entry-level home and buying what you’d consider move-up homes instead.”
In other words, homeownership is a better deal, but only for those millennials doing well enough to take advantage of it. The rest of the age group can look forward to rising rents.
One lender has taken the approach that to sell to millennials, you should have millennials doing your selling.
“To engage this group, we must understand their lifestyles, attitudes and the unique challenges that they face,” Mike Hardwick, president of Churchill Mortgage, told MPA, who launched his own in-house training academy in 2014. “The CMC Academy positions us to do that by developing the next wave of mortgage professionals who will help a new generation of borrowers realize the real American dream of debt-free homeownership.”
Zillow Chief Economist Svenja Gudell thinks the median age of first-time home buyers will hit a new high next year. In either case, Americans will continue the trend of buying their first homes later in life than they did in past decades, likely due to some mix of wage stagnation, rising housing costs, and a tendency to start families later in life.
See related story, “Do U.S. millennials really prefer renting?”
