According to the National Association of Home Builders, Millennials, those born in 1980 and later, are a large majority of the home buying market. In fact, 68 percent of Millennials are currently hoping to buy a single-family home. With Millennials currently numbering 95 million people in the United States, this represents quite a bit of buying potential. Here is a closer look at how Millennials are looking at the home buying market, what they are buying, and how it will impact the real estate market in Maryland in the coming years.
Millennials Know What They Are Doing
Millennials enter the home buying market with more information than previous generations. They know what it takes to renovate a home, how to navigate the real estate process, and how to determine the worth of homes. They use the Internet almost exclusively to help them in their search for a home, turning to the real estate agent only when they cannot find information they need on their own and for help with the home buying process and its legalities.
All of this information has made fixer-uppers popular with some Millennials. Because they know what it takes to get a home in good repair, they are less afraid of purchasing homes with outdated features. They know what to look for in terms of red flags and can confidently purchase a home that requires some sweat equity without fearing that it will be a money pit.
Millennials Know What They Want
Millennials are particular regarding what they want in a home. In 2018, this generation reported a walkable neighborhood that was diverse and engaging was important to them. They also were looking at smaller homes than previous generations of first-time buyers with upgraded amenities. Here are some more specifics about what Millennials are looking for in a home to purchase.
Features of Homes Millennials Buy
For Millennials, the single-family, detached home was, by far, the most popular choice. A large percent, 86 percent to be exact, chose this type of home, according to a 2019 report from the National Association of REALTORs.
Because many Millennials are in the throes of raising a family, they often want larger homes than some of the older generations. Among Millennial buyers, 29 percent wanted a home that was between 1,501 and 2,000 square feet, and 25 percent wanted a home between 2,001 and 2,500 square feet. Three or more bedrooms was important to 92 percent of buyers.
The features most wanted by Millennials in a home include:
- Laundry room
- Exterior lighting
- Living room
- Front porch
- Full master bath
- Hardwood flooring
- Efficient appliances
Millennials did not want a wine cellar, laminate countertops, his-and-her baths, or elevators.
Features of Neighborhoods Preferred by Millennials
The neighborhood where a home is located is one of the most important factors influencing a Millennial home purchase. In surveys, 63 percent report the quality of the neighborhood is an important factor they consider, subsequently, this the most important factor influencing a home purchase. Close proximity to work is a close second, with 61 percent reporting that was important to them in their purchase. Diversity and good schools are also important to these buyers.
Mortgage Trends for Millennials
Many Millennials are first-time buyers. As a result, many are getting a mortgage for the first time and lack a large down payment. In the 2019 National Association of REALTORs report, only 22 percent of Millennials were able to put down 20 percent or more on their home purchase. The largest percent, 26 percent, of Millennial buyers had to finance between 80 and 89 percent of their home purchase, and 22 percent financed between 95 and 99 percent. The average amount financed for Millennials in early 2019 was 91 percent.
The majority of Millennials (91 percent) opted for a traditional fixed-rate mortgage. Conventional loans accounted for 64 percent of those, followed by FHA loans (17 percent) and VA loans (9 percent). The majority of buyers from this generation reported finding the home loan process as easy or easier than they originally anticipated.
Potential Problems Facing Millennial Home Buyers
One potential problem facing Millennial home buyers, both in Maryland and in the rest of the country, is a potential dearth of homes available for sale. Millennials and Baby Boomers are competing for the same homes, and many Boomers are not listing their homes for sale like people of their age did in prior generations. This has created a scenario where Millennials have stiff competition for the homes they want. For that reason, today’s Millennial buyers need to be prepared with financing in place as they head into the market as buyers.