Much has been said and written about the Millennial Generation, and for good reason. As this group moves through their 20's and 30's, they are now the largest population segment on the planet. Young adult homeownership has been quite the divisive topic over the past few years. While opinions will vary widely on this group's ability to purchase real estate, we decided to see just how long young adults believe it will take to hit this milestone to better understand their perception of the situation.
It should be noted that this survey captures the lower end of the age range for Millennials and the higher end of the age range for Gen Z. While generations are an easy way to categorize age ranges, opinions from this group's survey will likely differ from those in their late 20's and early 30's.
Surveying Prospective Homebuyers (18-24) in Canada and the US
Recent surveys were conducted to ascertain the relative optimism and pessimism of Canadian and US young adults when it comes to home buying. The result of the surveys indicates that when it comes to their home buying prospects, young people in both countries are generally optimistic. In the United States, however, they are more optimistic than their Canadian counterparts. There are still a significant amount of young people who believe that owning their own home may be unattainable, and that feeling too, is more prevalent in Canada. This is perhaps down to the fact that the U.S. sits just below Canada in terms of price at approximately $2,942 per month. However, in some neighborhoods prices are much higher; rent in New York costs, on average, a staggering $4,200 per month, whereas the average 2-bedroom property or condo in Northern Virginia averages at $1,289.
Here are some comparative notes from the surveys.
- More US young adults already own homes. The surveys indicate that 24.4% of those surveyed from the United States already own a home when compared to only 15.8% of young Canadians.
- A significant amount believe they may never own a home. The number in this age group who felt home ownership was unattainable was surprisingly similar. 18.2% of Canadians hold this belief with 18.8% of Americans holding similar sentiments.
- Getting close to home ownership. More Americans felt they were closer to buying a home than Canadians. While 35% of young people in the US believe they would own a home within 7 years, that number compared with 27.8% of young Canadians.
- A longer term view. Canadians believe it will take them longer to own their own homes than Americans. The survey indicates that 38.2% of young Canadians believe it will take at least 8 years to buy their own home. The Americans, at 17.9 %, are more optimistic that owning a home will occur sooner.
Methodology and Margin of Error
The online survey included 1000 Canadians and 1000 Americans between the ages of 18-24. Respondents were living in a variety of housing markets throughout each country and were not concentrated in any one metropolitan area. The average margin of error for the Canadian survey is +2.25% / -2.33% and for the US survey + 2.21% / -1.96%. More detailed information including individual answers, bias tables, and more in-depth explanations of survey methodology can be found here.
As this powerful economic generation moves into and through adulthood, it continues to be saddled with some misperceptions, many of which have been unfairly placed upon them. Referring to them as the "everyone gets a trophy" generation, for example, may be more indicative of their parent's desires than their own. It can be valuable to recognize some of the other myths surrounding them. These myths include:
- They don't see homeownership as worthwhile.
- They aren't buying homes.
- They aren't careful with their money.
- They don't take the advice of others.
- They aren't responsible.
Perpetuating these myths may actually prevent those who may be trying to reach them have success. Perhaps no generation has been as maligned as Millennials.
Millennial Myths Debunked
An article in Money Magazine takes the point of view that many may have jumped to conclusions about Millennials and homeownership. The article addresses the fact that not only do Millennials value homeownership, they plan on owning multiple homes in the future. This is not unlike previous generations.
Millennials are buying homes and are the fastest growing age group buying homes today. A Fortune Magazine piece, quoting a Bank of America survey, says that one in six Millennials has savings of $100,000 or more. It goes on to state that nearly half (47%) of Millennials have at least $15,000 in savings. This is a far cry from the image of a credit card using, free-spending generation that doesn't manage their money. This is a group that is responsible, performs due diligence before making consumer decisions, and one that relies heavily on online ratings and reviews.
The Millennial Mindset
Some will place the blame for the reluctance of Millennials to enter the housing market on lack of motivation. It should be noted, however, that a large portion of this generation saw their families take the brunt of the effects of the housing crisis in 2008-2009. We may not have fully realized the impact the crisis had on these young people's psyches when it comes to homeownership. An article in Bloomberg strongly suggests this reluctance may be ending. It states that young people are not only moving out of their parent's homes but they are forming families and buying homes. The U.S. Census Bureau notes that while home ownership is still the lowest for those 35 and under, it has recently grown from 34.7% to 36% in a one year period; the largest increase of any group.
Sure, Millennials are worried about money. Many have been saddled with significant student loans after chasing dreams of high-paying jobs that didn't quite materialize. They have learned to be more cautious with their money. This has perhaps led them to be careful about significant life decisions like marriage, having families, and buying homes in competitive markets. While they may be a bit “late” to home ownership, they are coming and they are coming in full force.
Millennials, Home-Buying, and the Economy
There are plenty of good reasons many Millennials are now entering the housing market. Interest rates, while rising, are still extremely attractive. Millennials are more established in their careers and many feel ready for home ownership. They are regaining confidence in the economy. Rents are also increasing, especially in urban areas, making the option of buying more appealing. Millennials are recognizing that a home purchase can be a foundational part of a long-term financial plan. There is also probably an element of "the clock is ticking" effect.
How can Millennials better prepare for home ownership? Among many other steps to take to prepare oneself, they can do the following:
- Understand the effect credit scores have on home buying. Check credit reports for errors or negative notations.
- Don't take on any significant additional debt.
- Save for a substantial down payment.
- Understand the impact even a small difference in interest rates will make over the life of a mortgage.
- Know what are “must-haves” and what are “deal breakers” in a new home.
Millennials are well known for doing their research. Many will have significant knowledge even before contacting a real estate agent. They are comfortable with technology and may even be tempted to use a DIY platform in making a home purchase. Keep in mind, however, that this is also a generation that places real value on ease and convenience. They may have put off a major purchase like real estate until they have felt comfortable in the process. Real estate professionals who are willing to assist these first-time home buyers with their knowledge, experience, and patience will reap the rewards. They are well worth knowing more about.
There are significant facts and opinions we should understand about Millennials and real estate.
- American young adults (18-24) are more optimistic about owning a home than their Canadian counterparts.
- Millennials are the largest generation on the planet and make up 35% of the American workforce.
- This is the fastest growing group of homebuyers.
- There is a big market in changing minds of Millennials who don't feel home ownership is possible, especially in Canada.
- Many Millennial's buying, spending, and savings habits have been a result of the mortgage crisis of 2008-2009.
- They may have deferred major life decisions but they are making them in increasing numbers.
Whether generations are a product of the times or the times are a product of their generation, the simple fact to remember is that things change. With new technology, different economies, and evolving legislation, comes different kinds of home buyers. And, if one looks to appeal to a new generation, it's likely worth the time to understand how they feel and what they want.