Looking Back

Defined by Goldman Sachs as the generation born between 1980 and 2000, the Millennial generation comprises about 92 million Americans, which puts it ahead of the Baby Boomers as America’s largest generation.

Many people in their 20s and early 30s are saddled with low wages and mounds of debt, with salaries falling and job opportunities drying up during and after the recession. Those financial difficulties led many to put off purchasing homes, or even renting. Many Millennials, especially those age 18 to 29, lived with their parents during the recession while they dealt with earnings issues and student loans. A recent Harvard University study revealed that in 2013, the number of adults living with their parents increased by about 2.1 million. That same year, student loan balances increased by roughly $114 billion.

Andre Mitchell, a Realtor at Baird & Warner since 2013 and a Millennial himself, sees the Millennials as a group that isn’t afraid of change and is willing to take a hard look at a property before buying. They may have had two or three different jobs in the last five years; they’re cagey about long-term commitments and are willing to take their time to find exactly what they want.

“Millennial buyers want to make sure that their purchase is in an area that is beneficial to them, where there is opportunity and where the area is accommodating to their lifestyle and things of that nature,” Mitchell says.

A lot of Millennials stayed out of the housing market during the recession and in the years immediately following, as they were hit by a perfect storm of high unemployment, low wages and tighter lending requirements. The generation’s maturation, coupled with improvements in the job market, a gradual loosening of credit and a stronger economy in general, indicate the potential for a massive uptick in the number of Millennials shopping for real estate.

Looking Forward

With the economy on more solid footing, many are ready to strike out and buy their own homes. Nielsen expects Millennials to spend about $1.6 trillion on purchasing homes and an additional $600 billion renting in the next five years. Of those Millennials surveyed, 80 percent said they either plan to buy a home or they already own one.

There are some concrete signs of hope that Millennials are finally getting into the housing market. In its 2015 Home Buyer and Seller Generational Trends report released in March, the National Association of Realtors (NAR) revealed that Millennials born between 1980 and 1995 made up the largest segment of homebuyers by age, at 32 percent. They were followed by Generation X buyers born between 1965 and 1979 and all Baby Boomers born between 1946 and 1964, at 27 and 31 percent, respectively. The smallest portion consisted of buyers from the Silent Generation, born between 1925 and 1945, at 10 percent.

Of those Millennials, 68 percent were buying a home for the first time. An overwhelming majority – 84 percent – said that they consider their home to be a good investment for the future and 39 percent said that they were making the purchase because they wanted to own their own home.

However, many Millennials had trouble saving for a down payment (22 percent) and 97 percent financed their purchase, with a typical down payment of just 7 percent, compared to 10 percent for Gen-Xers and 22 percent for the oldest homebuyers.

Twelve percent of all homebuyers included in the survey said that they had to put off buying a home because of their debt loads. Millennials were no exception, with 54 percent citing student loan debt as the most significant financial roadblock they needed to overcome.

About 45 percent of Millennial homebuyers said that it was harder to apply and get approved for a mortgage than they expected. A vast majority – about 93 percent – opted for fixed-rate mortgages. Conventional loans made up the majority of mortgages for Millennials, at 56 percent, followed by Federal Housing Administration loans at 28 percent and Veterans Administration loans at 8 percent.