Despite popular beliefs, the millennial generation will eventually want to transition from their fast-paced, renter lifestyle into a single-family home with a mortgage, but the real surprise is where these young homebuyers are choosing to settle down.
Millennial homebuyers are growing in numbers, and more of them are purchasing single-family homes outside of urban areas in the suburbs.
The 2016 National Association of Realtors (NAR) Home Buyer and Seller Generational Trends study of 94,971 recent home buyers, which evaluates the generational differences of recent home buyers and sellers from June 2014 to June 2015, found that the share of millennials buying in an urban or central city area fell to 17 percent from 21 percent a year ago in this year’s survey, while only 10 percent purchased a multifamily home compared to 15 percent a year ago.
The largest group of recent buyers were millennials (35 percent) for the third consecutive year, more than the combined amount of younger and older boomers (31 percent), the survey data found. The median income of millennial homebuyers was $77,400, and they typically bought a 1,720-square foot home costing $187,400.
Overall, the majority of buyers in all generations prefer to buy a home in a suburban area and younger buyers tend to favor older homes, the report said.
So while urban areas may fit millennial needs as renters, they do not remain in city-centers when they are ready to buy a home, according to Lawrence Yun, NAR Chief Economist.
"The median age of a millennial homebuyer is 30 years old, which typically is the time in life where one settles down to marry and raise a family,” Yun said. “Even if an urban setting is where they’d like to buy their first home, the need for more space at an affordable price is for the most part pushing their search further out.”
Yun continued, "Furthermore, limited inventory in millennials’ price range, minimal entry-level condo construction and affordability pressures make buying in the city extremely difficult for most young households.”
Millennials are known for their tech-savvy lifestyles, but nearly all buyers predominantly used the Internet and a real estate agent while looking for a home. The study found that 87 percent of millennials and Gen X buyers used an agent and were also the most likely to use mobile or tablet applications and mobile or tablet search engines during their search.
"Supply shortages, strong competition and rising home prices in today’s market can make buying a home very stressful,” said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “While the Internet is the initial go-to destination to search for available listings, consumers want the expertise and insights of a Realtor to help them find the right home within their budget.”
Click here to view the full report.