Sometimes it feels like you can’t escape the headlines about how your generation — the millennials — are shaking things up. How you avoid malls, choose to marry and have kids later, contribute to the demise of chain restaurants and look to gain social good from your investments, not just financial returns — essentially challenging the tradition of the American Dream.
You might be rolling your eyes right now, but stay with us. This is not that kind of article.
You have specific wants and needs, as well as unique financial obligations that Baby Boomers and Gen X don’t have. Yet in many ways, you’re not that different than your predecessors. Many millennials still desire the big house, 2.5 kids and the attached garage. But, you’re also proving to be more financially-savvy and risk averse than your parents and grandparents. And you’re significantly less caught up in many of the social constructs that traditionally surround buying a first home.
In other words you’re doing it all on your own terms.
When it comes to buying a house, specifically, we think your conditions aren’t only working, they’re changing homeownership for the better. Here’s a look at how you’re doing it.
1. Relationship status doesn’t matter.
Generally speaking, older generations are more traditional, saying “I do” before taking on the responsibility of homeownership. But millennials are less constrained by social norms and don’t necessarily think that the personal commitment must come before the financial one. In fact, 15 percent of millennial homebuyers are unmarried couples, the largest percentage across generations.
Because marriage isn’t a prerequisite for millennials, they don’t linger in a rental simply because they haven’t yet met Mr. or Ms. Right. Once they’re established in their careers and have a healthy amount of savings, they’re taking advantage of the potential benefits of homeownership.
2. You’re patient savers.
In the past, most people would buy a more affordable starter home, stay in it for a few years and move into a larger house that had room for children. Millennials today are skipping the starter home and moving right into their dream home first. The National Association of Realtors reports that 30 percent of millennials bought homes worth $300,000 or more, and the average millennial’s home cost $217,000. (Compare that to starter homes, which typically cost between $150,000 and $250,000 or less.)
Since a lender requires you to make a down payment that’s a specific percentage of the price of the home, more expensive the house is, the larger your down payment must be. Instead of buying a home as soon as possible, you’re comfortable renting longer while diligently socking money away. This allows you to buy a home from a greater position of financial strength.
Plus, you’re qualifying for a bigger mortgage, which demonstrates you’re being responsible with credit. Well done!
3. You’re using technology.
Millennials tackle the homebuying process the same way that they do anything — online. You use digital resources to research everything from finding the right realtor to picking the best neighborhood. Real estate website Zillow found that millennials do the most online research during their home search.
Millennials are more likely to use apps related to homebuying and read more online reviews about realtors before making a final decision. You also use mortgage and home affordability calculators, as well as other online tools to research interest rates. Millennials want to know that they can comfortably afford a house, not just keep their heads above water. Your use of technology helps to ensure your new mortgage will be a reasonable part of your budget.
4. You don’t take on too much.
According to data from the Pew Research Center, millennials will surpass baby boomers as the biggest generation in 2019, and many millennials are already in their mid-30s with multiple children. These are the millennials who are established in their careers and are ready for their homes to reflect that.
Like other generations, Millennials consider their home an important financial investment. They know if their house appreciates significantly, it will add to their net worth and become a valuable asset. But they grew up during the Great Recession and the housing market collapse. Many were affected, either by struggling to find a job after graduation, experiencing their parents get laid off, witnessing a foreclosure or seeing their parents stuck in a house that was underwater. As a result, they’re wiser and more cautious first-time homeowners.
They want to buy a house in a neighborhood that will stay relevant whenever they decide to sell, but they’re concerned with not losing money on their home — something they witnessed during the housing bubble.
This valuable behavior — their willingness to buy a house that’s within their means — may make millennials the smartest homebuyers on the market.