According to one national housing trend report, first-time buyers make up 47 percent of all purchases. Half of those buyers are under 36 years old. It’s safe to say that millennials comprise a large segment of homebuyers.
The Zillow report indicated that millennials were the only generation to see an increase in their homeownership from the previous quarter., reaching 35.3 percent.
The report also noted racial differences: 66 percent of millennial homeowners are white, compared to 77 percent of all owners.
Millennials remember what happened to the housing bubble in 2008. That made many (understandably) gun-shy about buying. Another issue is the belief that only families with kids buy homes, not single people. (Although many are considering their pets when they buy, say recent surveys.) Last, the uncertainty of their careers is a legitimate concern. Millennials switch jobs more than any other generation, so that stability is important. That’s why renting is such a great option for many, because they haven’t nailed anything down. So, one point of educating this generation is also not trying to ram an inappropriate housing solution down their throats.
But more importantly, there are some exciting trends taking shape. As we look ahead in 2018 (and 2019), be sure to keep your eye on these five housing developments.
1. Starters are Getting Scarce
Although many buyers are interested in starter homes, they are getting harder to find. In many communities, the demand for starter homes far exceeds the inventory and has only been exasperated by our current housing drought. The crux of the problem is that builders say their costs for land, labor and materials are too steep to make money on modest single-family homes. To make their margins, they have to scale bigger.
2. Lifestyle-Focused Rental Complexes Will Make You Think Twice
To combat the housing crunch in many cities across the US, urban planners have had no choice but to build tiny. To optimize profit margins, developers must squeeze as many apartments under one roof as possible. Micro units as small as 300 square feet are not uncommon in parts of Los Angeles and New York City (Boston, your next). What makes these buildings different from those constructed in the past are the high-end finishes and amenities that provide residents with a sense of luxury and community feel. Chefs on-site, group fitness classes and spa access: These perks help to curb the drawbacks of living in such tight quarters. And your generation is taking notice: a large percentage of millennial home buyers consider renting instead of buying.
We’re sure to see more of these communities getting approved in urban areas where developers must build up to overcome land and density constraints.
3. Real Estate Marketers are Finally Getting You
Beautiful homes have been dominating my social media feeds lately. I’m definitely not complaining, just stating a fact. This has been a big year for real estate agents jumping on the social marketing bandwagon. Better late than never as this is surely something we will be seeing more and more. Data now supports that younger buyers are more dependent on visuals when it comes to the home purchase. Savvy listing agents are catching on and building complex web funnels to generate leads. High-quality visuals are becoming the new norm, as are sponsored Facebook ads, Instagram posts and digital advertorial.
4. Low Down Payment Programs are Coming to the Rescue
Over half of buyers put less then 20 percent. Which begs the question, how low can you go? The answer — according to Senior Loan Officer, Savvas Fetfatsidis of Guaranteed Rate, a National Top 1% Originator — is pretty darn low. Due to much lower default rates in the last few years, lenders are starting to cautiously loosen up some guidelines.
For borrowers with strong credit, 0 percent down options with no Private Mortgage Insurance (PMI) now exist if a property is located in certain rural areas. In more urban areas, three percent down programs with attractive interest rates are available. Just this year, we saw new programs where lenders actually contributed towards first-time buyer down payments and recently, we’ve seen an increase on maximum debt ratios.
For borrowers with less-than-perfect credit, FHA loans are still the name of the game: The program continues to change and improve the success rate for first-time home buyers. Since the down payment is a major hurdle to home ownership, these products are breaking down the barriers for young buyers who have little savings. As lenders compete for a piece of the millennial buyer pie, we’ll continue to see creative programs and financing products launched in 2018.
5. Gen Z is Right Behind You
With half of all buyers being under the age of 36, your generation is driving more of the housing market than we previously understood. Housing developers, real estate investors and listing agents have gone to great lengths to attract and market to young buyers. Now, a new cohort is coming into the fray – Generation Z. Born between 1995 and 2010, this subset of buyers is accustomed to on-demand information and services. Even in their young age, over half (57 percent) of Generation Z renters consider buying instead of renting. Comprising 21 percent of the American population, these individuals are just now graduating college and are sure to rapidly gain influence and power in the housing market – and perhaps drive major change.