People under the age of 35 are worse off financially than the generation before them, and it’s affecting their ability to purchase real estate, according to Paul Taylor, executive vice president of the Pew Research Center and author of the book The Next America: Boomers, Millennials, and the Looming Generational Showdown.
Historically, first-time home buyers have accounted for about 40 percent of total buyers annually, but that figure has dropped to 32 percent today. The main contributing factor is that millennials have a lower net worth than their parents did at the same age.
But this doesn’t mean real estate is out of the picture for millennials. In fact, the vast majority are optimistic about home buying, says Jessica Lautz, managing director of survey research at the National Association of REALTORS®.
According to a recent NAR survey, 94 percent of millennial renters say they want to own. But flat wages, rising rents, and student loan debt are major hurdles, Lautz says.
In 1983, households headed by an individual under the age of 35 had a median net worth of $15,260 compared to $10,460 in 2013, Taylor says. Conversely, wealth has significantly increased for those 65 and over: Their median net worth was $210,500 in 2013, up from $120,524 for that age group in 1983.
Taylor and Lautz presented their findings during the 2016 REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., last week. Taylor says downward mobility coupled with record-breaking student-loan debt has led to 39 percent of millennials moving back home with their parents.
“These shifts are creating big generation gaps that will put stress on our families, our politics, our pocketbooks, our entitlement programs, and perhaps our social cohesion,” says Taylor.
Here are eight facts you should know about millennial buyers that will help your brokerage understand how to reach them.
- The median age of a first-time buyer still hovers around 31. “This means that they are ready and willing to buy if they can, in fact, break into the market,” Lautz says. “It’s getting more difficult to get to that point, but the desire to do so hasn’t changed.”
- The population of millennials is still growing, with this generation expected to top out at 81 million by 2036. They’ve already overtaken baby boomers as the largest generation.
- Millennials are mobile-first. They grew up with cell phones and on social networking sites.
- They are obtaining a higher level of education than previous generations. Today, 27 percent of millennial women and 21 percent of millennial men have obtained a bachelor’s degree, compared to 7 percent and 12 percent among the silent generation (those born between the mid 1920s and early 1940s), respectively.
- They are getting married later in life compared to other generations. Today, the average age when women get married is 27, and for men, it’s 29. In 1963, it was 21 and 23, according to Pew Research.
- Single women make up the second-largest group of home buyers today. However, that share has dropped from 22 percent in 2006 to 15 percent in 2015, according to NAR.
- Millennials are more ethnically and racially diverse than previous generations in the U.S., Taylor says.
- According to NAR’s 2016 Home Buyer and Seller Generational Trends Report, millennials are often buying in first-ring suburbs , where homes are more affordable and commutes are shorter.
- Millennials know the value of working with a REALTOR®. According to Lautz, this generation has increased its use of REALTOR® agents from 69 percent in 2001 to 87 percent in 2015. “Not having been through the process before, they rely on real estate agents to get them through the competitive market and to the finish line,” she says.