Millennials often get a bad reputation when it comes to defying societal norms. Statistically, they’re getting married later, waiting to have children and buying homes at a later life stage. But according to that National Association of Realtors (NAR) 2016 Home Buyer and Seller Generational Trends report, Millennial homebuying habits may be trending toward the traditional path of their parents and grandparents.
In 2015, the largest share of homebuyers (35%) fell within the Millennial generation. Here’s what we know about Millennial homebuying habits last year.
They’re heading to the ‘burbs.
Millennials have often placed importance on living close to urban necessities and entertainment, and 2014’s generational trend report noted the larger amount of Millennials purchasing in urban or centralized locations.
But last year, the amount of Millennials who moved to the suburbs increased. Lawrence Yun, NAR chief economist attributes the shift to Millennials’ needs for “more space at an affordable price”.
They’re using low down payment programs.
The median down payment for the Millennial generation was 7%, which indicates that a large majority are utilizing several of the low down payment programs available. Most notably, as FHA financing became even more affordable with the mortgage insurance rate reduction, 29% of Millennial homebuyers used an FHA loan for their home financing.
They’re placing pride in homeownership.
Forty-eight percent of Millennial buyers said their primary reason for purchasing a home last year was the desire to own a home of their own. This was the largest share of homebuyers across all generations in the report. For Millennials, this percentage increased nearly 10% since 2014.
They want to be close to work.
Location is still important to the Millennial buyer, even if they’re willing to move out of the city for affordability and space. For buyers 35 and younger, commuting costs were more important to them than the costs of heating and cooling their purchased home.
Apart from quality, convenience to their job was the biggest factor influencing Millennial buyers’ choices in neighborhoods (60%).
They want to avoid renovation and repair costs.
Though the percentage of Millennial buyers purchasing newly-built homes dropped from 13% to 11%, of those who did purchase new, nearly half said their reason for purchasing a new build was to avoid the need for immediate renovations and/or plumbing or electrical repairs in the near future.
They are still combating student debt.
Among buyers who said that saving for a down payment was their most difficult homebuying hurdle, Millennials were the most likely to cite student debt as the issue delaying their savings fund. Surprisingly though, the median Millennial homebuyer carried less student loan debt than the 36-50 and 51-60 age groups.
Last year, 44% of Millennial homebuyers were carrying student loan debt.
They are finding that getting a mortgage isn’t the hardest part of buying a home.
Finding the right property was the hardest step of the homebuying process, according to Millennials. Paperwork, understanding the process and steps and then saving for the down payment were cited as the biggest homebuying hurdles for buyers 35 and younger.
Only 16% of Millennial buyers said acquiring home financing was their hardest homebuying step.
Interested in purchasing your first home this year? Download our free Mortgage 101 Handbook for everything you need to know about the home buying and financing process.