Housing industry, brace yourself: The Millennials are moving in.
A generation that's about 90 million strong, Millennials (or Generation Y) form the largest demographic wave in the nation's history — even larger than the Baby Boomers. And now that the oldest are in their early 30s (the youngest are 12), they're coming of age for home ownership.
It's a momentous time for an industry still reeling from bad loans, foreclosures and price collapse. Now, builders, developers and agents are gearing up for the onslaught. Just this month, PulteGroup and Better Homes and Gardens Real Estate each released a survey of what Millennials want — evidence of their impending influence.
They're not that different from their parents, except they're not as wowed by luxury and are more likely to demand technology and flexible space.
"This generation is coming at the right time," says Fred Ehle, vice president for PulteGroup. "It's the largest potential number of buyers coming in to the market."
They would've come sooner had the recession and high unemployment not deferred many Millennials' dreams. "We forget how tough it is right now for these young GenYs to have a down payment," says Greg Tsujimoto, manager at John Burns Real Estate Consulting in Irvine, Calif. "They have student debt. Another obstacle is finding and establishing their careers."
Slowing GenY's entry into the housing market: delaying moving out of Mom-and-Dad's house, delaying marriage and delaying kids.
"Right now, it's either GenXers or Boomers buying," Tsujimoto says. "It's no secret Millennials want to own a home. That hasn't changed. But there's at least a four-year delay."
The pent-up demand is starting to surface, and "that will more than offset a year or two we missed in the market," Ehle says. "As soon as we get these folks out of their parents' basement and into a job ... "
Unemployment for Millennials (born from 1982 through 2001) is just under 10%, more than two points higher than the U.S. rate of 7.7%, he says.
They will buy when they're ready, says Tommy Stephenson, broker/owner of Better Homes and Gardens Real Estate Executive Partners in Augusta, Ga. "Millennials are more well-versed and educated in regard to today's real estate industry and are prepared to buy when the time is right for them," he says.
One advantage: Most are first-time buyers not hampered by underwater mortgages or having to sell one house before buying another.
"Why waste money to rent?" says Cristin Morton, 30 and single, who bought a house late last year in North Phoenix through Better Homes and Gardens. "I'm paying less for my mortgage than I was renting."
What industry research shows:
More than half the Millennials who bought Pulte homes last year said the main reason was to invest and build equity.
Tiffany Troyer, 25, graduated in 2009 from Baylor University. She did what many of her peers did after college: moved back home. She stayed a year, got an apartment and has been renting ever since.
"My parents pressured me to look for a house the last two years," says Troyer, area director for Nitro Swimming, an Austin swimming school.
One day, she agreed to do a rent-vs.-buy spreadsheet. "Rent has increased three consecutive years," she says. "You'll never get that back. Just looking at those numbers, I could own for less than rent."
She qualified for a 3.25%, 30-year fixed mortgage with 20% down and bought a new 1,900-square-foot, three-bedroom, two-bath ranch-style house in Leander, a northern Austin suburb. Her mortgage: less than $1,500 a month, compared with $1,600-a-month rent for a 1,000-square-foot apartment.
"I get double the space," Troyer says. "My goal was to buy something that, long-term, if I have a family and kids, it's a place I can stay in."
Pulte's January online survey of 521 adult renters ages 18-34 just released found that efficient use of space is an important feature to 84%. More than two-thirds want an open layout for entertaining. Most want ample storage, and 63% want outdoor space to extend living areas.
"What may be different about this buyer is that they may have more stuff," Ehle says. "It's different kind of stuff: technological gadgets, gaming. They also do work from home."
Better Homes and Gardens' online survey of 1,000 adults ages 18 to 35 finds that Millennials are not keen on traditional floor plans or traditional rooms. They're a "fix-it" generation who would rather do home improvements themselves than ask parents for money. They want their homes to be as unique as they are and each room to represent aspects of their lives, from hobbies to gaming, the survey shows.
One in five say "home office" is a more appropriate name for their dining room, and 43% want to turn their living room into a home theater.
Morton, a medical sales consultant, lives in a 2,300-square-foot, four-bedroom house. The dining room is not a dining room but an entertainment room. "I really want to utilize every room," Morton says. "My parents have a traditional living room. Nobody ever sits there."
Miguel Berger, president and broker of Better Homes and Gardens Real Estate Tech Valley in Albany, N.Y., was showing a house to a couple recently. Their reaction: "Who uses a dining room?"
The survey shows they would rather have extra space in their kitchen for a TV than a second oven, and that tech features are more important than curb appeal. Almost two-thirds say they would not buy a house without up-to-date tech capabilities.
Yet "they're more frugal because they have lived through a recession," Berger says. "They're very concerned about value. ... They like to know the per-square-foot value."
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