Millennials Are Causing a Surge in New Home Building
One of the biggest trends predicted for the 2016 housing market is the growing number of millennials projected to enter the market as first-time home buyers. As baby boomers enter retirement age, the real estate industry has kept a close eye on the new generation of home buyers, who seemed reluctant at first but have now jumped on the home ownership bandwagon. In particular, we are seeing a surge in millennials choosing to build new homes versus purchase resale homes. In this article, we will take a closer look at millennials and their growing interest in the real estate market, in particular new home construction.
Who Are the Millennials?
The term ‘millennial’ refers to a large and diverse group of young adults who were born anywhere between 1981 and 2000. This means the the oldest millennials are turning 35 this year and the youngest are still in high school. With this broad age range, the millennial generation currently varies greatly in their stage of life and living arrangements.
The real estate industry has been watching millennials in particular because of their size. This group represents the largest generation of possible home buyers the United States has ever seen – 92 million people. How they chose to approach housing, from the decision to rent or buy to the types of homes they prefer, will have a profound effect on the real estate industry as a whole.
Millennials’ Path to Home Ownership
Another reason the housing industry has been so interested in the millennial generation is that they have taken an nontraditional path toward home ownership. As the oldest members of the millennial generation graduated from college, a strange trend was discovered. Instead of heading out on their own to get married, buy a home and raise a family, many chose to move back in with their parents. From this trend emerged the term boomerang generation, referring to those individuals who boomerang back home after college.
Those who did not ‘boomerang’ still did not choose the traditional path to home ownership. Many were drawn to the cities where job opportunities were abundant. They wanted to be in the heart of it all, with a walkable distance to work, shopping, and entertainment. Therefore, many chose to rent initially rather than buy.
These factors had many in the real estate industry concerned that millennials did not embrace the notion of homeownership as an important part of the American Dream. However, as we emerge from the housing crash and resulting recession, we are learning there is a much more fundamental reason why millennials had been avoiding purchasing a new home, and the reason for many was that they considered home ownership to be too much of a financial stretch for them.
Despite their affinity for new trends and technology, millennials are actually quite a fiscally conservative group. The oldest millennials came out of college right around the time of the recession. Growing costs of higher education meant many graduated from college with a lot of student loan debt, and as job growth slowed, they also had fewer employment opportunities. Fifty-four percent of millennials cite student debt as their biggest obstacle to buying a home, and another common reason for wanting to wait to purchase a home has been slow wage growth.
These factors led millennials to head to the city where they could find higher paying jobs while others moved back in with their parents to save money. However, as the economy has picked up, millennials are now entering the housing market in full force. This group currently dominates the home buying market, representing 32 percent of the total U.S. housing market. They also represent 68 percent of all first-time home buyers.
Why Millennials Are Choosing New Homes
With a better understanding of the path millennials have taken to home ownership, you may be wondering why so many are choosing to purchase new homes instead of used. The answer often lies in the fact that they have patiently saved and waited to make a home purchase, and when they finally take the plunge, they want their home to have everything they want and need. Millennials are particularly drawn to more affordable home builders like Legend Homes because this cost-conscious group can pretty much ‘have their cake and eat it too.’
Here is a look at some of the main reasons why millennials are choosing new home construction.
Affordability with Customization
Millennials want an affordable new home, but they also want the ability to add in some customizations. This group is not looking to stretch beyond what they can really afford. They want smaller but customized homes.
Affordable home builders give millennials the ability to choose the floor plan they want, and many millennials are opting for single level floor plans. Many have specific wants, such as an open floor plan and nice outdoor space. They also want the ability to incorporate some ‘flex space’ into the design with versatile rooms that can be used for different purposes as their lifestyles change.
Millennials are also want their new homes to be energy efficient. This overlaps with two important values – a growing awareness of the environment and the desire to cut costs wherever possible. Affordable home builders can include a range of energy efficient features, from high-quality insulation, doors and windows, to energy efficient appliances and HVAC systems.
By choosing a new home over a used home, millennials are also looking to avoid high maintenance cost. Older homes can be quite costly – in fact, a NAHB study found that the average maintenance cost for a home built before 1960 is $564 per year. Millennials can avoid these extra costs with a new construction home.
Technology is also important to the millennial generation, and new homes can be built with their technology needs in mind. For example, by installing special electronics and wiring systems, home builders can set the home up to accommodate technology such as high definition TVs, hard wired fire and alarm systems, and full-house sound systems. Millennials are also incorporating technology into their new homes by creating dedicated media and game rooms and installing technology they can control from their smartphones.
A final reason why millennials are choosing to build new homes is they want to settle down in a good community. New home builders typically build homes in communities that have good schools and are close to work and recreation – everything a millennial is looking for when they finally make the move to the suburbs.
Millennials have been a perplexing group for the real estate industry, but current trends show that they are just as interested in homeownership as prior generations. Because of the many benefits that new homes offer, millennials are approaching affordable home builders who can balance customizations and costs for the perfect first time home purchase!