A new study offers insight into the younger generation of homebuyers.
Historically, family-ready adults have always been the driving force of housing growth. People in their 20s and 30s get their first jobs, save for a down payment, get married and buy a home. But millennials today are burdened with college debts, high rents and living expenses, mobile-driven careers and personal lives that make settling down to buy a home challenging. On the bright side, 8 out of 10 of millennials who don't already own a home say they would soon like to own one.
So what does a next-generation millennial homebuyer look like? And how can we better cater to them and get them off the sidelines? Here are some helpful insights gathered through the latest ValueInsured Modern Homebuyer Survey profiling today's homebuyers under the age of 35.
Their home purchase budget is less than expected.
Three-quarters of millennial homebuyers are looking to spend less than $500,000 on their next home. And more than half (53 percent) have a goal price of less than $250,000. Considering a majority of millennials plan to buy their next home in an urban city where prices tend to be higher, it's no surprise that millennial homebuyers are compromising by buying smaller homes or homes that require a longer commute than planned.
They're taking advantage of low down payment mortgage options.
With the proliferation of low down-payment mortgage options, more millennials are planning to take advantage of them, especially among first-time homebuyers. Some 1 in 4 (25%) plan to put 5 percent down or less to buy their next home, and another 22 percent plan to put down 6 to 10 percent.
Overall, 34 percent of millennial homebuyers surveyed say they plan to seek financial help from family to fund their down payment, and 29 percent say they plan to seek help from friends, employers or state- or federally-run grant or homebuyer assistant programs.
The next-gen homebuyers don't always envision children in their next home.
22 percent plan to live in their new home alone.
41 percent plan to live in their next home without children.
47 percent plan to live in the next home with multiple children.
Interestingly, 9 percent plan to live in the next home they buy with a friend(s), roommate(s) or rental tenant(s).
They're not looking to buy their forever home.
Some 63 percent of millennial homebuyers plan to live in the next home they buy for six years or less, making the old "rule of seven years" obsolete for most of them. One in four plan to sell and move in under three years, another quarter plan to live in the next home they buy for three to five years.
They prefer cities to suburbs.
Over half of all millennial homebuyers plan to be urban dwellers.
55 percent plan to buy in a city or urban area.
36 percent plan to buy in the suburbs.
9 percent plan to buy in a rural area.
To real estate professionals, it's important to understand this next generation of homebuyers is very different from their parents as they're not looking for a home to buy and grow old in for the next 30 years. What they want in a home today—especially one that fits their budget—may not be the same that they would want in three to five years. By offering flexibility and mobility that provides today's homeowner with control along with an exit plan, real estate professionals could earn serial clients for life and future referrals instead of a one-off transaction.
Joe Melendez, CEO of ValueInsured, which provides simple, affordable solutions that protect homebuyers against unpredictable, negative market changes. ValueInsured's flagship product, +Plus by ValueInsured, is the only product that reimburses homeowners up to their full down payment should the market go down.