Enter the Millennial: A New Generation of Homebuyers with Power to Change the Industry
Who has more power than the Baby Boomers? Their children, AKA the Millennials.
In order to understand the potential impact of the Millennial generation, we must first understand the term “Millennial,” and then understand why this segment of American population wields so much power today.
In the past, America’s politics, policies, and economy have largely been controlled by Baby Boomers. But now, the Millennials (also known as “Echo Boomers” or “Generation Y”) are taking over the reins. Primarily, their power is in their numbers. More numerous than the Baby Boomers, this generation’s adults, typically described as having been born between 1982 and 2000, are the largest demographic category in U.S. history: an estimated 80 million strong. With more members of this demographic reaching adulthood now, their decisions about careers, families, and homeownership directly relate to, and thus will shape, the American Real Estate industry.
Millennials and Real Estate: Healthy Skepticism
The first thing this generation has to overcome, in order to achieve homeownership, is skepticism. They, after all, have watched the real estate market meltdown with little frame of reference as to what came before or what might come after. They may have already dealt with an underwater mortgage, may have lost money on a home, may have applied for a mortgage and been turned down. They may also have seen their parents or friends lose equity or even lose their homes completely.
This skepticism doesn’t necessarily translate into lifetime dedication to renting. However, those Millennials who want to buy are likely to want to buy conservatively. They may not be much interested in an interest-only or option ARM loan product. Especially given the historically low interest rates available today, Millennials may prefer opt a 30 year fixed, and to buy something on the low end of what they can qualify for.
In truth, such conservatism can only help the future of real estate. If people buy slightly less than they can afford, (rather than the polar opposite) they are less likely to run into trouble later paying for and thus keeping their homes.
Less is More
This same “making do with less” approach to buying real estate guides the Millennial homebuyer’s choices in other respects as well. Millennials are part of a generation more aware of the environment, of their “carbon footprint” upon that environment, than ever before. This generation is unlikely to buy a larger house than needed as a status symbol. To the eco-conscience Millennial, more square footage than needed is a waste, and possibly an unethical one. After all, the energy and materials needed to create and maintain that space can’t be justified if there’s no one using them.
Eco-conscience logically aligns with economy-conscious. Again, those extra square feet the Millennial must pay to heat, clean, and care for don’t make much sense when money is very much one of those precious resources the entire generation seeks to conserve.
“Easy Access” has a Whole New Meaning
This generation, much like the Baby Boomer one we focused on last week, has an evolving definition of “simple lifestyle.” Before, the suburbs might have attracted young families for the large homes, easy parking, and short-drive-away access to huge shopping areas. Now though, more Millennial look for walkable neighborhoods: retail, food, culture and community all within a few blocks. For work, this generation often opts for public transportation. For education, Millennial parents want to put down roots near other parents to form the kind of close knit, true community we might think of more as “small town” or even “village.” The sprawl, consumption, and anonymity of suburban life have largely fallen out of favor.
Rose Colored Glasses Firmly Shelved
Also fallen out of favor for this generation: cluelessness about the real estate business. Any self respecting Millennial knows that the Internet has made what used to be “classified information” readily available. Tech savvy buyers—and these are the tech savviest– can check comps, past sales history, the latest MLS and by-owner listings, even search foreclosures and short sales, all with no help from an agent by simply accessing a site like ZipRealty’s searchable database. This doesn’t mean the Millennial has no use for an agent, however. Particularly in this more challenging time in the industry, this young generation is most likely to turn to an agent considered “trustworthy” and continue the relationship with that agent with fierce, unwavering loyalty for a lifetime of buying and selling.
But what makes an agent “trustworthy,” exactly? Interestingly, this definition hasn’t changed much since the very first “Realtor” in history, because the basic qualifications are the same. Like all buyers, Millennials want honesty and they want quality. But because this generation knows so much about the industry already, its members are hyper-aware of agents who aren’t experienced, aren’t qualified, or who make a practice of spinning fairy tales. These Millennials seek out and find professionals who give them the “real story,” and give it to them straight. They won’t tolerate agents who don’t know their market, or who sugar coat the issues, insisting everything’s rosy. This generation wants to work with a Realtor who tells the truth: good and the bad; the ugly and the beautiful.
We’ll return Wednesday with more on what the Millennial homebuyer wants in a home, with real stories from ZipRealty’s own agents working to find “perfect homes” for this, the largest generation of potential homeowners since the Baby Boomers.