NAR Survey of Generational Trends ShowsÂ Younger Buyers More Optimistic
Millennials are more confident than any otherÂ age group that their recent home purchase wasÂ a good financial investment, according to a newÂ study released this week. The inaugural 2013Â National Association of REALTORSÂ® HomeÂ Buyer and Seller Generational TrendsÂ evaluated the generational differences ofÂ recent homebuyers and sellers and found thatÂ while eight out of 10 recent buyers consideredÂ their home purchase a good financialÂ investment, the number was even higher, 85Â percent, for younger buyers under the age ofÂ 32.
â€œHomeownership is an investment in your future, and is how many younger AmericanÂ families begin to accumulate wealth,â€ says Paul Bishop, NAR vice president of research.Â â€œThe oldest of the Millennial generation are now entering the years in which people typicallyÂ buy a first home, and despite the recent downturn, homeownership still matters to them.Â The sheer size of the Millennial generation, the largest in history after baby boomers, isÂ expected to give a powerful boost to longÂrun housing demand, though in the shortÂterm, mortgage accessibility and student debt repayment remain challenges.â€
The study found that the largest group of recent buyers was Generation X Americans,Â those born between 1965 and 1979, who comprised 31 percent of recent purchases,Â followed closely by Millennials, sometimes called Generation Y, those born between 1980Â and 2000, at 28 percent. Percentages of recent home purchases among prior generationsÂ was significantly lower: 18 percent were Younger Boomers, those born between 1955 andÂ 1964; 14 percent were Older Boomers, Americans born between 1946 and 1954; and 10Â percent were from the Silent Generation, those born between 1925 and 1945.
The median age of Millennial homebuyers was 28, their median income was $66,200 andÂ they typically bought a 1,700Âsquare foot home costing $165,000. The typical Gen X buyerÂ was 39 years old, had a median income of $93,100, and purchased a 2,100Âsquare footÂ home costing $235,000.
The previous living arrangement of recent buyers varied greatly across the generations;Â among Millennials, 65 percent rented an apartment or house and 22 percent lived with theirÂ parents, relatives or friends; more than half of all Baby Boomer and Silent GenerationÂ buyers owned their previous residence.Â
The study found that older generations of homebuyers prefer more recently built homes. Millennials typically bought homes built around 1986, nearly a decade older than the homesÂ typically bought by the Silent Generation.
Younger buyers had a tendency to stay closer to their previous residence, often stayingÂ within 10 miles, whereas older buyers moved longer distances, typically more than 20 milesÂ from their previous home.Â Younger buyers were more likely to buy in an urban or central city area than older buyers;Â 21 percent of Millennials bought a home in an urban location compared to only 13 percent
of Older Boomer and Silent Generation buyers.
The reason for buying a home also varies across the generations; younger buyers mostÂ often cited the desire to own a home of their own whereas older buyers wanted to be closerÂ to family and friends. When it comes to factors influencing neighborhood choice, youngerÂ generations cited convenience to jobs, affordability of homes, and quality of the schoolÂ district. Older generations placed higher importance on convenience to family and friendsÂ and healthcare facilities.
When it comes to a homeâ€™s green features, younger buyers placed higher importance onÂ commuting costs than older generations who placed higher importance on a homeâ€™s energy
efficient features and living in an environmentally friendly community.
Millennials tended to make more compromises with their home purchase than any otherÂ generation. Millennials most often conceded on the price and size of the home, lot size,Â distance from job and style of home; whereas nearly half of Older Boomer and SilentÂ Generation buyers made no compromises on their recent home purchase.
As the age of recent buyers increases, so does the rate of owning more than one home;Â among Millennials, 8 percent own more than one home, which could include either aÂ vacation home or investment property; compared to 21 percent of Gen XÂers, 28 percent ofÂ Younger Boomers, and 27 percent of Older Boomers, and 26 percent of the SilentÂ Generation.
Homebuyers of all ages often begin the home buying process by looking online forÂ properties for sale; however, the frequency of use of the Internet to search for homesÂ decreases as age increases. Ninety percent of Millennials frequently used the Internet toÂ search for homes compared to less than half of Silent Generation buyers. YoungerÂ generations of buyers were also more likely to find the home they purchased through theÂ internet; older buyers most often learned about the home they purchased from their realÂ estate agent.
Buyers of all ages gain many benefits from working with a real estate professional. AmongÂ the age groups, younger buyers are more likely to want an agentâ€™s help understanding theÂ home buying process, presumably because many are buying a home for the first time. Â Younger buyers were most often referred to their agent by a friend, neighbor or relative,Â whereas older buyers were increasingly likely to work with the same agent they previouslyÂ used to buy or sell a home.
When it comes to choosing an agent, reputation was important to buyers of all ages;Â however, younger buyers more often cited an agentâ€™s honesty and trustworthiness as the most important factor compared to older buyers who most often cited the agentâ€™sÂ knowledge of the neighborhood â€“ perhaps because older buyers tend to move furtherÂ distances and may have less familiarity with area.
The median down payment for Millennials was 5 percent, considerably less than olderÂ generations of buyers whose down payment ranged from 8 percent for Gen X buyers to 22Â percent for Silent Generation buyers. Younger buyers who financed their home purchase most often relied on savings for their down payment whereas older buyers were more likelyÂ to use proceeds from the sale of a primary residence.
â€œAn interesting finding is that Older Boomers and Silent Generation buyers found the mortgage application and approval process more difficult than expected compared toÂ younger buyers,â€ said Bishop. â€œThis underscores the ongoing challenges that many creditÂ worthy homebuyers face with todayâ€™s tight credit standards.â€
The largest group of recent home sellers was from Generation X, comprising 30 percent ofÂ recent sales, followed by Younger Boomers (21 percent), Older Boomers (21 percent) andÂ the Silent Generation (19 percent). As the age of sellers increased, the share of marriedÂ and unmarried couples declined and the percentage of single female home buyersÂ increased, from 4 percent among Millennials to more than 17 percent among Boomer andÂ Silent Generation sellers, perhaps due to death or divorce.
Like buyers, older sellers tend to move greater distances, and are more likely than younger
generations to move out of the state or region. While younger buyers typically moved toÂ larger, higher priced homes, the data shows a clear trend of downsizing to smaller, lessÂ expensive homes among the Older Boomer and Silent Generations.Â Typically, the older the seller, the longer the tenure in the home; while Millennials had beenÂ in their previous home for a median of five years, Gen XÂers stayed 8 years, YoungerÂ Boomers owned their home for 11 years, Older Boomers stayed for 13 years, and the SilentÂ Generation kept their previous home for 15 years.
The reasons for selling a home also varied among the generations. Younger buyers were more likely to move to accommodate job relocation or desired to upgrade to a larger home.Â In comparison, older buyers were often looking for a smaller home due to retirement andÂ because upkeep was too difficult due to health or financial limitations, or to be closer toÂ family or friends.
When it comes to negotiating, older sellers are often more willing to reduce their homeâ€™sÂ asking price but are less likely to offer buyer incentives such as home warranty policies orÂ assistance with closing costs.Â
Sellers of all ages typically found a real estate agent through a referral or friend; however,Â younger sellers were more likely to use the same real estate broker or agent for their homeÂ purchase, 59 percent of Millennials used the same agent compared to 42 percent of OlderÂ Boomer sellers. Younger sellers typically want their selling agents help with selling theÂ home within a specific timeframe and pricing the home competitively, whereas older buyersÂ are looking for their agentâ€™s help with marketing the home and finding a buyer.