By: JLL Dallas
The popular press continually advances the generational divide between Millennials and everyone else. Portrayed at the scale of a geological shift, making cracks into canyons, the press enjoys illustrating that Millennials’ priorities get further from the standards of prior generations.
One topic that is often discussed is that Millennials are not home buyers. Rather, they prefer to rent in the urban core so they can be close to work, friends, and entertainment options. Like so much of today’s media hype, that is only one side of the story.
Last year, the National Association of Realtors (NAR) released a report on home buying that looked at generational differences. Surprisingly, at 32%, Millennials (also called Gen Y) comprised the largest share of U.S. home buyers in 2014! This was just a wink more than the combined “younger” and “older” Boomer segment. Who would have thought?
Source: 2015 National Association of Realtors® Home Buyer & Seller Generational Trends
Our immediate follow-up observation is that these are the “older” Millennials, who are beginning to have families, and are now poised to own. But that is not the case. With a median age of just 29, these Millennials are pretty representative of the overall group. And, according to NAR, 65% are married, which mirrors the overall buying public. So, to our amazement, there is really no generational difference here.
The report did highlight a few modest divergences. For example, 14% of Millennial buyers were unmarried couples. This is notably higher than the average for the other age groups, but not staggeringly so. In addition, 20% were singles, which is a slightly lower share, but is balanced out by the unmarried couple number. This makes sense given that they are at a point in their lifecycle of “coupling-up”.
From a housing perspective, the dominant reasons these first-time Millennial buyers cited for their purchase was “cost savings”, a desire to “own their own home”, and “it was the right time to buy”. NAR also highlighted that most had been renters, with only a minority having lived with parents (another myth in the popular press). Oh, and, by the way – even though the Millennials have high college debt, 83% noted that they needed to “save” for their down payment (with only 25% receiving a gift from a relative or friend).
Somehow, this makes Millennials look a lot like everyone else – and closes the chasm often portrayed between the generations.
One observation that the NAR did corroborate was that Millennials do like more urban living. In this instance 21% of buyers purchased in an urban area or central city. But, wait a minute – that is still a small share… Where did the other Millennial buyers choose? Very close to half bought in the suburbs or a subdivision – and 80% opted for a 3-bedroom, single family detached home. That breakdown really looks a lot like everyone else – obviously adjusting for the fact that these are starter homes.
To get a sense of the Millennial buyer in Dallas, we spoke with Lee Anna Meadows of Dave Perry-Miller Real Estate who has a wealth of experience across all the buyers groups. One of Lee Anna’s initial observations was that it is impossible to lump the Millennials under a single heading, noting that because they are the largest age group at this time, they are also “very diverse”. Overall, she noted that a large segment is quite practical and plans for the future for career, financial, and investment decisions.
While counter to the popular press that often portrays Millennials as somewhat footloose, this view is on target with the NAR’s findings. Lee Anna echoed this sentiment, noting that the Millennials with whom she works, even those in their mid-20s, see rapidly rising apartment rents as a disadvantage and do considerable research when they move into their buying decision – evaluating neighborhoods, home values, commuting patterns, and elementary schools.
Lee Anna cites that the reason for this is because “they are looking to the future and planning to stay in the neighborhood or community for several years”. Consistent with NAR’s national findings, she also observed that DFW’s Millennials “want a quality house or condo with most improvements already completed – no fixer-uppers here – to balance their tight budgets and busy work and social lives, as well as making it easier to save for the future”. While they may opt for a neighborhood in transition, like Oak Cliff, key ingredients that they demand are proximity to work – and proximity to night life like restaurants, retail and other entertainment options. Lee Anna also noted that, having suffered through the most recent economic downturn, her Millennial buyers “strive for as much house as they can afford with all the updates – but watch their budgets closely”. In fact, “many choose to buy under their approved budgets to avoid over-extending themselves financially”.
In the end, the Millennials are and will continue to be an important home buying group – that is not all that different from past generations as they began home buying.
Please contact our office for information or questions about the commercial real estate market. For additional information on the housing market, Lee Anna Meadows can be reached by e-mail at firstname.lastname@example.org.