Over the years, millennials have received a reputation of prioritizing a fast-paced career over homeownership. However, research and studies of their behavior have shown that the American dream of owning a home is still alive and well for this demographic. This fascinating generation has sparked many conversations throughout their lives, and there are many factors that contribute to their decision-making skills as consumers.
Are millennials still buying homes?
According to the 2016 National Association of Realtors® Home Buyer and Seller Generational Trends study, millennials are the largest group of new homebuyers for the third year in a row.
"I believe the American Dream is still alive as cycle events flow, people get married, have children, and look to put their stake in the ground,” confirms Garrett Clayton, CEO of AmCap Mortgage, LTD. “Millennials are very thoughtful in the way they spend their money. They are looking for the right opportunity and experience.”
Americans, more than ever, have a deep need for privacy. This is shown in a desire to keep their information, households, activities, and intimate connections free from general view. Social media has made drawing the line between these two poles more challenging. However, owning a home helps young homeowners achieve some privacy as strangers cannot infiltrate the privacy of their own home.
In addition to that, millennials place a high value on their right to choose.
“Most Americans have simplified the Constitution to one statement: ‘I have a right to choose.’ They don’t want to be told what they can and cannot do. They want to have as many choices as they can get,” says A.W. Pickel, former CEO and nationally recognized mortgage lending expert.
The current housing market is very attractive to millennials as interest rates are at historic lows and financing options are abundant. Pickel, who is often referred to as the “Mortgage Professor,” explained that millennials are moving away from a 30-year fixed mortgage plan and embracing products that reflect today’s changing economy, such as adjustable-rate mortgages.
Adjustable-rate mortgages, those on which the interest rate is not fixed for the entire life of the loan, allow for rates that vary based on movements in an interest rate index. Fast-paced, career-focused millennials are drawn to these types of mortgages, because the rate reflects inflation and the borrower can adjust it as their income increases.
Millennials are changing the market
According to a study by the Intelligence Group, one-third of millennials stated that they had more fun in the research process than in the buying process. Because they enjoy making informed decisions, they will take their time to seek a neighborhood that can accommodate their social lifestyles — one that offers an easy commute and access to amenities.
Millennials value homeownership for various benefits, including investment opportunities and tax benefits that renting cannot provide. According to a 2014 Fannie Mae survey, close to 75 percent of millennial renters and 90 percent of current millennial homeowners believe that owning a home is a better choice than renting.
Because renting isn’t a cost-effective option, millennials support the idea of moving to suburbs to increase the value of their mortgage. In fact, they often begin their process by pre-qualifying and identifying prospective neighborhoods.
“One of the biggest things I'm seeing is that millennials are often seeking financing before reaching out to a realtor," says Clayton. "They have homes and neighborhoods in mind, and they begin the process by pre-qualifying for a mortgage, and that’s created an interesting dynamic in the real estate community."
This trend has drawn more traffic from online forms and led to higher engagement deriving from online marketing efforts.
The average time spent living in a home in America is five to six years
“Educated homebuyers now buy a home with the idea of selling it again," Clayton adds. "In this perspective, being a homeowner doesn’t stop you from being mobile."
Millennials continue to challenge the traditional real estate market to fit their need for flexibility and mobility.
Homeownership exemplifies millennials’ innate right to privacy and their desire to make informed decisions. The current housing market is attractive as interest rates are currently low and financing institutions have more flexibility in the products they offer. These factors contribute to making the home buying experience more appealing to millennials.
“The American Dream is still to buy your own home," says Pickel. "Young Americans still aspire to be the master of their own home.”
Millennials are making the homebuying process an experience. Leveraging their need for privacy and providing them with flexible options catering to their fast-paced lifestyle will contribute to keeping the American Dream alive.