It is incredibly important for real estate professionals to stay up to date on the forces affecting both their local market and the market overall. Among the most important factors on which to keep informed are the changing preferences of those purchasers who make up the pool of buyers.
Currently, the largest demographic segment of the homebuying market are Millennials (now over 37% of buyers). While they have represented the largest portion of the market for a few years, there are several factors that are driving the increased importance of understanding their effect on the real estate market.
Data On Wealth Transfer
Millennials are the largest living generation, but have, for their entire tenure as adults, been the poorest. Coming to age in an era of economic downturns, fragile recoveries, stagnant wage growth, and an uncertain future has taken its toll on Millennials’ finances.
However, Millennials have now been in the job market for a sufficient amount of time to see modest wage growth, are investing with vigor, and stand to inherit huge sums from Boomers. The exact amount that they will inherit is up for debate, and it will certainly fluctuate with the complex forces of the economy over time, but Millennials stand to inherit up to $68 trillion over the next few decades. It is almost certain that, in a twist of fate, they will become the richest generation that America has ever seen.
With these facts in mind, where are Millennials putting their money, and why? They have now been a major market force for a number of years, and the effects of their influence are starting to become clear.
Millennial Investment and Buying Habits
Not all of the wealth that Millennials stand to gain is coming from inheritance. While there is the popular image of a Starbucks carrying, slouchy cap wearing, 20-something living in their parent’s basement, this generation is, in fact, beginning to invest huge sums of money. They are, unsurprisingly, doing it on their own terms.
While Millennials are definitely still strapped for cash compared to other generations, they are beginning to invest and plan for the future using crowdsourced knowledge and tools that the finance industry has designed specifically for Millennial preferences. That seems to be the key to tapping into what this generation has to offer: listen to their preferences and provide tools which allow them to live the kind of life that they are willing to make sacrifices to live.
The rate at which this generation is saving and investing is, in fact, outstripping the rate that Boomers did at the same point in their lives. Though they are later to the game with beginning a portfolio, Millennials are allotting 7% more of their income for it than Boomers did, and purchase decisions that they make are beginning to reflect these changing priorities.
Despite their reputation for the opposite, maturing Millennials are proving to be cautious spenders on consumer goods and savvy investors. As they grow their wealth and can invest more in assets that provide a return, this generation is focusing on putting money into industries they feel they know and ones that they feel make a societal difference. Examples of such targets are emerging tech, clean energy, and companies with a strong moral or social stance.
The wealth that Millennials are beginning to accumulate from increases in wages and the returns from their investments are fueling their ability and desire to own homes. As mentioned earlier, they are now the largest age cohort making up the homebuying population.
Home Preferences and How Real Estate Must Adapt
While there is, obviously, no way to determine exactly what every Millennial wants, there are some measurable trends that seem to have strong support among members of the generation.
To the cohort, searching for a home that checks more of their boxes, even if it takes significantly longer, is preferable to settling. According to research done by Core Logic, Millennials are often willing to shop for up to a year for the right home, rather than compromising on their “must-haves.” Among the most common aspects on which they are unwilling to compromise are things like smart home features or environmentally friendly homes.
As referenced, that same research shows that there is a strong preference among Millennials for homes that come with or can be easily upgraded with smart devices. Smart locks, smart lights, advanced environmental detectors, and similar devices are important enough to the group that it is worth considering adding a modest number of them to a listing in order to make it more appealing to buyers. Some new construction homes are even beginning to incorporate unused conduit, large electronics closets, and other features that will allow homes to be easily and constantly upgraded as tech trends change.
The first generation of digital natives, Millennials are looking for homes that are strongly represented online. With 99% of them starting their home search online and 58% of previous buyers having found their home on a mobile device, there is little doubt about the value of adding rich multimedia to a listing. Video or virtual tours, extensive photography, and informative listing descriptions are vital to attracting the attention of buyers from this group. Companies such as American Real Estate Media are here to help agents provide the extensive digital presence that most effectively gets homes sold.
While it may be a stereotype of the generation, the data bears out that they actively seek homes in environmentally and socially conscious communities. This may include things inherent to the homes themselves (like solar power, improved insulation, and efficient appliances), but it can also include characteristics of the community in which the home sits (such as walkable or mixed residential areas, green spaces, and diverse recreation options). When listing a home, these features have never been more important to highlight.
As far as where they are looking, there is not yet a clear consensus. Before the influence of the pandemic, older Millennials seemed to be at the point where they were most actively looking to purchase medium-sized homes in the suburbs, with younger Millennials looking for homes with outdoor space in cities. But, the pandemic seems to be speeding up many purchase timelines and driving an overall market shift towards more spacious homes in the suburbs. Only time will tell if this pandemic-fueled shift is permanent.
Monitoring Changes Over Time
Making up the largest segment of homebuyers, Millennials are starting to accumulate significant wealth, and they will continue to do so over the next several decades. It is impossible to ignore their influence on the market or the ways the market must change to meet their preferences.
Fortunately, there are a wide variety of resources available to help agents stay fresh on the latest data that describes Millennial buying habits and preferences. Companies such as American Real Estate Media are here to help provide the resources that agents need to tap into this lucrative market and make the most of their listings.
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