Housing Market: The Effect of Millennials

Millennials are a generation of significant income inequality. Wealthy, college educated millennials who have had a chance to pay down their student loan debt or were able to not have student loan debt comprise most of the millennials who now own homes. However, millennials without a college degree have 19% less family wealth than previous generations and Black millennials have 52% less family wealth than previous generations had at the same age.

This economic inequality means that those who can afford to purchase homes are doing so and those who can’t, continue to rent, which will further exacerbate income inequality in the coming years.

Starter homes are increasingly bought up by investment companies to be used as rentals. This leaves millennials buying more expensive first homes than previous generations. As a tech-savvy generation, millennials have changed much of the home-buying process over the last decades.

Tech-Oriented House-Hunting

Millennials are dedicated to their devices, and for this demographic group, technology plays a central role in home buying. According to the National Association of Realtors (NAR), a full 99% of millennials search online to get general-purpose information about the housing market and home buying.

Millennials are also around twice as likely to use their mobile devices in their search than older baby boomers, with 58% of millennials finding the place they want to buy via their smartphone or tablet. According to NAR, that directly affects the way real estate agents and brokers approach their role in the buying process.

Digital advances have transformed real estate marketing, points out Steven Gottlieb, an agent with Coldwell Banker Warburg. “In the earlier days of online property marketing, we’d grab a digital camera and take the photos ourselves,” Gottlieb says. “Today, virtual or traditional staging with professional photography is commonplace to make homes pop on online marketplaces next to thousands of competing listings.” What’s more, he says, agents who don’t do some staging or use a professional are doing sellers a disservice. 

Communicating With Realtors

Millennials also differ from previous generations in terms of how they use tech to communicate with realtors. “They prefer the majority of communication to be via text message,” says Jill Hussar, a broker-owner at Hussar Real Estate in Lakewood Ranch, Florida.

Hussar reports that millennials use text messages to express interest in a property, schedule appointments, and ask questions, while phone calls are usually reserved only for more urgent or pressing concerns. Texting represents the most immediate back-and-forth line of communication.

NAR research suggests that agents are adapting to this demand for electronic communication, with 90% of agents communicating via text and 94% using email. Another 34% chat with clients through instant messaging.

Another digital impact is in how agents list homes. Hussar says that tech-savvy millennials are leading agents and brokers to introduce features like live streaming and video in lieu of traditional photographs.

“Videos give the audience a broader view of the property, communication, and location,” Hussar says, helping agents get in front of potential buyers and in particular, millennials.

In Demand: Affordable Houses Close to Where They Work

Millennials are the generation most likely to care about finding housing close to where they work. 44% of those questioned listed commuting costs as very important when considering where to live. 74% listed being convenient to their job as an important factor when picking a neighborhood. 58% listed overall affordability of homes as important.

And almost half of millennial homeowners—47%—prefer to live in the suburbs as opposed to the big city or rural areas, online real estate company Zillow reports.

Impact of Increasing Incomes

The desire for more deluxe digs reflects, in part, millennials’ delay in entering the housing market. They have waited longer for a home of their own, and now they want a place where they can stay for a good long time. They can also finally afford it: college-educated millennials had median annual earnings of $56,000 in 2018, which was roughly equal to college-educated Generation X workers in 2001. What’s more, they had median household income of $71,400 in 2018, compared with $70,700 for Generation X households in 2001.

“Hard-working millennials, pulling in handsome salaries appear increasingly eager to self-validate by spending on cars, vacations, homes and other material possessions,” says Gerard Splendore, a broker at Coldwell Banker Warburg. Must-have features include high-end appliances, landscaping, furnishings, finishes, and high-tech gadgets, he says.

The Bottom Line

Millennials have left a lasting impression on the housing market, and more changes may be on the way as this next generation of home buyers enters the fray. Focusing on the positive impacts created by millennials is key to keeping that evolution in perspective. An emphasis on technology, for example, may result in a streamlined, more efficient home buying process. And more millennials moving to the suburbs could help balance out the effects of rising housing prices in urban areas.

Gottlieb believes the millennial desire for instant gratification in the housing market stems from growing up with social media. ““They don’t seem to want to take on renovations, even before the existence of current supply chain challenges. They’d rather move right in,” he says. “This is causing a wider gap in price, value, and days-on-market between older properties—even if they have great bones—compared with new construction. Previous generations were more open to renovating an older property and seeing the potential in something that wasn’t staged and professionally photographed.