You may have seen my earlier blogs about how the real estate market, and the homebuilding sector, was about to face a significant increase in interest from millennials. Thus far in 2015, we’ve seen that to be true. About 5.2 million renters say they expect to purchase a house in 2015, up from 4.2 million last year. And according to a recent National Association of REALTORS® report, Home Buyer and Seller Generational Trends 2015, Gen Y has the largest share of first-time home buyers, at 68 percent.
Speaking in general terms, Gen Y’s are savvy shoppers, and there are a lot of them. In fact, this year their numbers are expected to surpass the Baby Boomer generation. From a real estate shopping perspective there are major differences between Gen Y and other generations in what they are looking for, how and what they’re buying, and where they’re renting. We need to understand those differences because with an improving economy, those looking to move from being a renter to a buyer will continue to increase. To cater to these new demands, builders have had to make some major adjustments with how they do business, including building locations.
For one, young homebuyers want to be located in a place very rich in amenities. Walkability and public transportation is a priority, as they want to be able to ditch their cars. They like being close to their areas of work and play. Cities are recognizing this, and developers are building communities specifically around areas of public transportation, and this is driving new apartment construction.
A prime example of this is Loudoun Station, which is at the end of the Silver Line of the D.C. Metro. A complete community has been built around this one stop, with a mix of shops, restaurants, entertainment venues, residences and offices. This is only one of many examples around the country of how builders are adapting home construction and marketing to this new customer base.
Even for married Millennials with young children, ease of transportation is still very important, along with the need to be in good school districts. Homebuilders recognize this and are focusing efforts to build communities in these desirable areas. Additionally, young home buyers want the inside of their homes to be just as amenity rich as their neighborhoods. They want homes to be “smart” with built-in technology. They desire multi-use rooms, good for entertaining (gone are the days of the formal dining room!).
As these cost-conscious Millennials graduate into the buyer market, builders must get creative with ways to keep costs down. One great program that I’ve seen recently is the Neighborhood Housing Services in Silicon Valley, which is finding creative ways to involve the government in the affordable home building process. They’re doing this by focusing building efforts on areas in need of gentrification, areas where the city wants to transition into a more upscale community. The key is to attract Millennials to move into the area with affordable homes that otherwise they wouldn’t be able to afford. Neighborhood Housing Services partners with builders and REALTORS®, and they’ve created their own lending arm that’s allowed them to do things other businesses won’t, or haven’t. They also offer monthly home buying education classes for Millennials, which are invaluable.
Stewart’s Homebuilder group is focused on partnering with these organizations providing affordable housing and realistic options for ownership. We understand the need to provide creative solutions, so Homebuilder has partnered with the Stewart Specialty Insurance group to provide home buying concierge services.
Through these customized services, the homebuyer can get discounted pricing from suppliers for cable, internet, home security, moving services, etc. And the best part? It only takes one call. We also offer innovation insurance products to builders and their homebuyers, including Home Value Protection, which protects a buyer’s home value. This is incredibly valuable to a home buyer who’s concerned about the value of their home decreasing over the next few years. It ensures them that their investment is protected, and removes some of the fear of taking the plunge and signing on the dotted line to move into their first home.
Jed Kolko, chief economist for Trulia®, thinks that we’re only at the beginning of a multi-year period where more Millennials become home owners, and I tend to agree. There are still many young adults that for various reasons are delaying getting married and having kids, and thus delaying buying a home. But with the job market improving, and the costs of renting increasing, I imagine Millennials will stop delaying and commit to making a house, their home.
Other references:
For a quick snapshot of homebuying and selling by generation, check out http://www.realtor.org/infographics/home-buying-selling-by-generation. This breaks out Millenials/Gen Y, Generation X, Baby Boomers…