Millennials — people born between 1981 and 1996 — are among the largest group of homebuyers today, making up 37% of the overall share in 2021, according to data from the National Association of Realtors. It’s no surprise that millennial homebuying trends and preferences are shaping how builders design new homes and how sellers remodel their existing homes to appeal to this crop of potential buyers.
Overall, convenience to a homebuyer’s job and other desirable home amenities are important factors when it comes to choosing a home for millennials. However, both these factors may pose affordability challenges, depending on location, in the current hot seller’s market. Keep reading to learn more about the top millennial homebuying trends to watch the rest of the year.
- 1. Millennials want newer homes with technology perks
- 2. Millennials like the idea of sustainable homes
- 3. First-time millennial homebuyers want more space
- 4. Millennials prefer the suburbs over big cities to raise their families
- Gen Z vs. millennials: How they differ on homebuying preferences
- First-time buyer mortgage advice
1. Millennials want newer homes with technology perks
Sixty percent of homebuyers prefer to buy a newly built home over existing ones, according to a report from the National Association of Home Builders (NAHB). Perhaps the main advantage is that new homes come with the convenience of being move-in ready; homebuyers can expect a modern, updated home that’s aesthetically attractive. Plus, with a new home, there’s less worry over fixing plumbing issues or older appliances.
What’s more, a projected 30 million households are planning to add some form of smart–home technology. The term “smart home” refers to devices with controls that typically automate, control, or monitor various home functions. For instance, homeowners can install HVAC systems in which the temperature can be controlled through a connected smartphone app. Smart lighting solutions are also a popular choice; home systems like Alexa and Google Assistant can work with smart bulbs, and your voice can turn lights on and off.
Seller tip: If your home is older, consider making cost-efficient upgrades (think fresh paint, new carpet, or new appliances). These items won’t necessarily break the bank but could help your home stand out from other existing homes for sale.
2. Millennials like the idea of sustainable homes
The same NAHB report states that although just 15% of homebuyers are willing to pay more for a home that’s touted as eco-friendly, 57% are willing to pay more for a home if they think they’ll save big on annual utility costs.
ENERGY STAR features are among the most desirable since a majority of homebuyers know about this green certification program. Some of these include energy-efficient appliances, windows, and lighting. Entire homes can also earn an ENERGY STAR rating; certified homes, on average, use 20% less energy than non-ENERGY STAR homes.
Seller tip: Stick to straight-forward upgrades that won’t cost a fortune, such as installing LED lightbulbs and purchasing ENERGY STAR appliances (when you have to replace them), to cater to this millennial homebuying trend.
3. First-time millennial homebuyers want more space
The closure of many workspaces during the COVID-19 pandemic meant that around 75% of employees work from home full-time or do so through a hybrid model (part of the time in-person at work, the other part at home). According to a survey conducted by Pew Research Center, more than half or those surveyed (64%) would prefer working from home, even after the pandemic is over.
This shifting attitude towards work could mean that millennials prefer homes with larger spaces — remote workers need somewhere to do their job, so it makes sense to have a dedicated home office. Those staying at home more often may want more space for hobbies or relaxation, such as a home gym or an outdoor lounge area. Considering that the most common type of homes purchased are detached, single-family homes, it’s safe to assume that homebuyers are looking for more space to accommodate their lifestyles.
Seller tip: Stage the rooms in your home so that prospective buyers can envision the home being used for these types of activities. Setting up a spare bedroom or a small nook to look like an office space can position your home to meet this trend. Also, consider reconfiguring furniture so homebuyers envision larger spaces, and add plenty of lighting.
4. Millennials prefer the suburbs over big cities to raise their families
The 2021 NAR Home Buyer and Seller Generational Trends report shows over half of millennial homebuyers purchased homes in a suburban area. More specifically, 52% of those aged 22 to 30 and 54% of those aged 31 to 40 bought homes in suburban areas. Furthermore, U.S. Census data backs this up, with homebuying trends veering towards living in suburban areas close to urban centers.
The appeal of the ‘burbs is you’re more likely to find larger homes than in urban areas. Suburban areas typically have plenty of amenities, such as parks, retail, dining, and community centers. And some suburbs, particularly those close to city center, may have a faster commute time to work, better walkability, and access to transportation.
Seller tip: Highlight nearby amenities to attract prospective millennial buyers. Those who are selling single-family homes and even townhomes may benefit from this trend the most when they list their homes.
Gen Z vs. millennials: How they differ on homebuying preferences
Though both millennials and Gen Z prefer using technology to start their research to buy a home, there are some differences in how the younger generation — defined as those born from 1997 and onward — prefers to purchase homes.
While it’s too soon to tell, the oldest Gen Z members are starting to become homeowners. That’s why it’s important to learn how to market to Gen Z vs. millennials now to recoup as much value as possible when selling a home later on.
Research so far shows that Gen Z are buying homes that are $160,000 lower compared to millennials, perhaps due to lower salaries. Plus, even though only 2% of homebuyers are members of Gen Z, data suggests this generation is purchasing homes earlier in life and values homeownership.
It could be that Gen Z simply prefers smaller starter homes. Their purchasing power may grow as they get older and reach new life stages. For now, Gen Z homebuyers are more likely to choose homes in more affordable areas, such as the Midwest or farther out in the suburbs. While space is of concern to millennials, there isn’t much indication Gen Z will continue this trend for now, because larger homes means a bigger price tag.
First-time buyer mortgage advice
Homebuyers, especially those who’ve never owned a home before, may feel intimidated by today’s red-hot housing market. Since there’s more buyer demand than there are available houses in many real estate markets, it’s important to get your mortgage financing in order before you embark on a house hunt.
In that spirit, here’s some first-time buyer mortgage advice to get you started:
Get your finances, credit in order. If your credit scores are low, work on improving them before applying for a mortgage. If you have high monthly debt payments in relation to your gross monthly income, work on paying down debt to lower your debt-to-income (DTI) ratio. This measures how much of your monthly, before-tax income is going toward debt payments. Your lender can recommend specific steps to take now in order to improve your chances of a successful mortgage preapproval in the near future.
Shop around with multiple lenders. As you shop, compare loan terms and programs, customer service, and interest rates. Shopping around ensures you find a lender who can meet your unique needs while ensuring you’re getting a competitive deal. Also, ask lenders what first-time homebuyer programs they offer if you’re new to homeownership.
Get preapproved for a mortgage. A mortgage preapproval is a conditional commitment from a lender to lend you money. Having a preapproval letter in hand shows sellers you’re more likely to have the financial means to purchase a home – and that a lender has vetted your finances.
Stick to a budget. Look at homes that have a comfortable monthly payment. In other words, don’t feel the need to borrow the max amount a lender is willing to let you borrow. Use a mortgage calculator to crunch numbers and decide if the monthly mortgage payment is affordable given all of your monthly debts and other financial obligations.
Save, save, save. You’ll need an earnest money deposit (usually about 1% of the home price) when you submit an offer to indicate your seriousness to the seller. At closing, you’ll have to pay closing costs, which can range from 3% to 6% of the loan amount, as well as the down payment amount.
Ready to buy a home? Talk to a local Finance of America Mortgage Advisor today to learn more about your mortgage options.