As one of the largest generations making up the housing market, millennials are looking for homes and represent the largest percentage of homebuyers today. Even though many face burdens like student loan debts, they don’t let that stand in the way of their home buying journey. Though most millennials decided to wait to enter the home buying scene compared to their baby boomer parents, they’re more ready than ever to settle down into a place of their own.
We’ve compiled a list of this generation’s preferences, challenges and all there is to know about what this generation is looking for as they take the housing market by storm. Read on to get a glimpse into how this generation treats the home buying journey — or jump straight to the infographic below.
Millennial Homebuyer Characteristics
Millennials are individuals born between 1981 and 1998 and are currently ages 22 to 39. With the median age range of first-time homebuyers at 34 years old, this makes millennials the generation that’s now dominating the home buying market. Here’s a breakdown of the kinds of buyers who currently make up the millennial homebuyer market:
- Younger millennials ages 22–29 made up 13 percent of homebuyers in 2020.1
- Older millennials ages 30–39 made up 25 percent of homebuyers.1
- 67 percent of older millennial homebuyers are married compared to 50 percent of younger millennials.1
- 35 percent of older millennials have a bachelor's degree, while 44 percent of younger millennials hold a bachelor’s degree or higher.1
- The median age of millennial homebuyers is 34 years old.1
- The median household income for younger millennials is $80,000 compared to older millennials, whose median household income is $102,800.1
- 79 percent of millennial homebuyers are buying homes for the first time.2
Do Millennials Want To Buy Homes?
Millennials are eager to buy homes, but are they financially prepared for such a huge investment?
Obstacles to Homeownership
With many millennials facing financial challenges, their ability to save for a home has halted. Besides a down payment, the overall cost of living has been a burden facing most of this generation.
- Only about 5 percent of millennials have had their mortgage application denied, with around 30 percent of them being denied because of a low credit score.1
- Millennials say debt delayed saving for a down payment about 2 to 4 years.1
- 48 percent of millennials said saving for a down payment is one of the biggest hurdles they face.3
- 41 percent of millennials said homes are too expensive and 36 percent say the cost of living is too high.3
- Though many think millennials spend too much on avocado toast at restaurants, only 5 percent say spending at restaurants has been a reason they couldn’t afford a home.4
Regardless of their debts or costs of homes, becoming a homeowner still remains a top priority. So much so that millennials are willing to put off major life events — like having a wedding or a child — to be able to save for a home.
- 40 percent of older millennial homebuyers bought a home to take care of their aging parents.1
- 34 percent of millennials are motivated to buy a home because they want to start a family.3
- Though millennials are looking to start families, 40 percent say they would put big milestones like getting married or having kids on hold to save for a home.3
- Needing more space (32 percent), job or location change (18 percent) and the financial milestone of owning a home (24 percent) are some of the key motivators for millennial homebuyers.3
- 81 percent of millennials believe that they will live in their dream home in their lifetime.4
How are Millennials Affording Homes?
Many millennials rely on first-time homebuyer programs to ease the stress of affording a down payment. No matter the obstacles, this generation continues to prove that they’re willing to do what it takes to reach such a huge financial milestone.
- 20 percent of millennials have taken on a second source of income to afford a down payment for a home.3
- Millennials are three times more likely than older generations to get help for a downpayment from a family member.3
- 31 percent of millennials are looking to their parents to cosign on a mortgage loan.5
- In 2019, 33 percent of millennials relied on first-time homebuyer programs to help afford a down payment and closing costs.6
Tip for Homebuyers:
Most states offer down payment assistance programs for first-time homebuyers that may be used in addition to FHA benefits, depending on your state’s guidelines. These programs can help cover down payment costs, closing costs and provide homebuyer education. Research local affordability programs to see if you qualify, or check our first-time homebuyer program state directory for more information.
The Millennial Home Buying Process
As a generation who grew up tech-savvy, millennials lean on the internet as their trusted source of information. Many millennials rely on online sources to help guide them through the home buying process’s beginning stages. In order for real estate agents, mortgage lenders and homesellers to lure this generation in, building a strong and aesthetically pleasing online presence is essential.
- Over 90 percent of millennial homebuyers go online to gather information during their home search.1
- Millennial homebuyers spent an average of 2 to 3 weeks searching for homes before contacting a real estate agent.1
- 63 percent of millennials found the home they purchased online during March of 2020.1
- Around 25 percent of millennials found the home they purchased with the help of a real estate agent in March of 2020.1
- In March of 2020, about 25 percent of millennials pre-qualified for a mortgage online.1
- Zillow is the most popular real estate search portal amongst millennial homebuyers.2
"Consult with your agent to discuss putting yourself in the best possible position to make an offer on a dwelling specific to the market in which you are purchasing — i.e. a pre-approval letter, a game plan with your agent, potential out of pocket expenses and proper reserves that will be needed to negotiate from a position of want as opposed to a position of need,” said Gregory P. Chaplain, Real Estate Agent at The Real Estate Group.
What Do Millennials Want In a Home?
While many may think that millennials lean toward city life, recent data shows otherwise. More than half of this generation is interested in purchasing a home in a suburban area opposed to urban city areas. As millennials are nearing their 30s, starting a family and settling down have become top priorities for many. With this is mind, good neighborhoods and school districts have massive appeal to millennials.
- In March of 2020, over 50 percent of millennials were looking to purchase a home in a suburban area, while 14 percent were purchasing in urban city areas.1
- A safe neighborhood, good school district and walkability to bars and shopping areas are some of millennials’ top priorities when shopping for homes.3
- 81 percent of millennials value location over the size of a home.4
To avoid the extra work associated with fixer uppers and older homes, this generation favors homes that are move-in ready, even if that means sizing down a bit. Those leaning towards older homes do so because they believe they have a better overall value. This generation has shown that they prefer buying a single-family home over purchasing a condo or apartment because it’s a better investment as a first-time buyer.
- Over half of millennial homebuyers wanted to buy a new home as opposed to a previously owned home to avoid renovations and problems with plumbing and electricity.1
- Single-family homes are most popular among millennials with over 80 percent of millennial buyers purchasing these types of homes.1
- Over 30 percent of millennial homebuyers wanted to purchase a previously owned home in 2020 because it has a better overall value.1
- 28 percent of millennials say bad or ugly renovations would be a deal breaker when shopping for a home, while 22 percent say they would pass on a home if it was outdated.3
- 7 out of 10 millennials say they would prefer buying a move-in ready home even if it meant sacrificing the home’s size.4
Energy Efficient Homes are Becoming a Priority for Millennials
Energy efficient features seem to be a leading trend millennials look toward in home purchases, with efficient lighting and appliances being top features.
- 70 percent of millennials want energy efficient lighting in their homes.7
- 31 percent of millennials say appliances with Energy Star ratings are a must in a potential home.7
Tip for Homebuyers:
FHA’s energy-efficient mortgage program is available to buyers looking to go green on their home and save money on utility bills. This program helps buyers finance energy efficient improvements with their FHA insured home loan. Through this program, buyers will be eligible for a higher loan amount to cover the costs of added appliances and improvements. Though the loan amount will be higher initially, it makes it more affordable for homeowners by lowering operating costs.
“Common energy-efficiency red flags home shoppers should look for before putting an offer in on a home include anything related to utilities, old or neglected plumbing, electrical or HVAC in the home,” said Szana Marr, Real Estate Agent at Boardwalk Realty.
Millennial vs. Gen Z Homebuyers
With the average age of first-time homebuyers being around 33 years old, you wouldn’t guess that Gen Z would be interested in buying a home anytime soon, but home buying is becoming a priority for the older individuals of this generation.
Gen Z was born between 1997 and 2012 and are currently ages 8 to 23. Though they only account for about one percent of new homebuyers, they are predicted to continue to make their way into homeownership in the next few years. Even with the difference in age, Gen Z and millennial values and outlook on homeownership are very similar.
- In 2020, Gen Z made up less than 1 percent of homebuyers.1
- 85 percent of Gen Z and 88 percent of millennials say homeownership is important for personal success.8
- It’s estimated that Gen Z will obtain homeownership by age 30, compared to the average age of 33 for millennial homebuyers.9
- 30 percent of Gen Z and 33 percent of millennials would prefer buying a new home over an existing home.10
- The median purchase price of homes purchased by Gen Z was $160,000 in December 2019 compared to a median price of $256,500 for millennials.11
- On average, Gen Z put a down payment of 5 percent toward the purchase of their homes while millennials put down around 8.5 percent.11
- Experts agree that the homeownership rate among Gen Z in 2035 (ages 35–44), will be 38 percent higher than the current rate of millennial homebuyers today.12
The Future of Millennial Home Buying
Millennials are projected to continue to dominate the housing market as we enter 2021. With the effects of the pandemic dropping interest rates, millennials took full advantage of putting down smaller down payments, despite the rise in home prices. With more millennials working from home, sellers will begin to shift their strategies to showcase features of homes that are suitable to this new lifestyle. Though 2020 was an unpredictable year, experts predict a strong home buying season in the Spring and Summer of 2021.
- Home prices are projected to increase by 5.7 percent in 2021.13
- Home sales are projected to increase by 7 percent in 2021, placing a strong emphasis on millennial homebuyers who are expected to be looking for family homes.13
- With many millennials working from home, shopping for homes in suburban areas as opposed to urban city areas will continue to rise in 2021.13
- Over the next 10 years, millennials are expected to account for 15 million home sales.14
Tip for Homebuyers:
As we enter 2021, mortgage rates are projected to remain low and stable, making it an ideal time to become a homeowner. Lower interest rates could increase your buying power, meaning you may be able to afford more homes than you initially expected with higher rates. Receiving a lower interest rate can save you money over time, making home buying more affordable to first-time home buyers.
Housing trends are constantly changing, and millennials prove that their priorities and the way they search for homes continue to evolve. With so many millennials ready to settle down and start their home buying journey, this generation will continue to rule the housing market for years to come.
If you’re a millennial looking to purchase your first home, let us help you qualify for an FHA loan and start your journey to homeownership.
- 2020 Home Buyers and Sellers Generational Trends Report. National Association of Realtors. March 2020.
- 2019 Millennial Home Buyer Report. Clever. Nov. 2020.
- 2020 Millennial Home Buyer Report. Clever. June 2020.
- Guiding You Home Survey. Coldwell Banker Real Estate. March 2020.
- The Bank of Mom and Dad is Still Open: Survey. LoanDepot. Feb. 2020.
- Down Payment Survey. Bankrate. Sept. 2019.
- Top Green Features Millennials Want in a Home. National Association of Home Builders. Oct. 2019.
- 2019 Millennial Homeownership Report. Apartment List. Nov. 2020.
- Gen Z Consumer Survey Report. Freddie Mac. Aug. 2019.
- 2020 Housing Trends Report. National Association of Home Builders. Sept. 2020.
- Q4 2019 Generational Propensity Report, Realtor.com. Jan. 2020.
- Home Price Expectations Survey. Zillow. Dec. 2019.
- 2021 Housing Market Forecast and Predictions. Realtor.com. Dec. 2020.
- The good, the bad, and the likely for housing in 2021. Housing Wire. Dec. 2020.