Millennials and Homebuying: Great Interruptions

  • Categories:

    Industry Trends, Marketing Insights

  • Date:

    May 26, 2020

Millennials and Homebuying: Great Interruptions

Industry Trends Marketing Insights

More has been written about millennials than perhaps any other generation in recent history. Their work habits, brand preferences, voting records, and ubiquitous and omnipresent use of social media have been the topics of endless articles and studies. How would technology impact these early adopters of technology as adults? And how would their demand for flexible working environments impact traditional office life in the long run? Marketing professionals, in particular, have been fascinated by this generation for the better part of a decade.

A 2020 eMarketer report on U.S. millennials and other sources explores the topic in great detail. Here’s my take:

As a whole, millennials are the generation that has redefined what it means to advance into adulthood.

Born roughly between 1981 and 1996, they entered the workforce during the Great Recession and have been saddled with student debt and stagnant wage growth ever since. Nearly 62% of millennials reported living paycheck to paycheck in 2019, and almost half of them pursue side hustles in the gig economy to earn extra income. It’s also important to note that the current economic downturn is the second in a decade for this generation, at a time when they should be headed into some of their highest earning years.

Statistically speaking, millennial purchase power and major life decisions are likely to be delayed by global and economic conditions beyond their control.

And there’s something to be said about their self-professed lack of financial literacy.

While this is a troubling trend, a recent 2020 millennials report from eMarketer indicates that this generation has made progress toward becoming homeowners — an accomplishment that indicates what could be described as a quest for stability, given millennials’ experience with the economy thus far.

Millennials do not have a disdain for homeownership.

In many ways, society has characterized millennials as Peter Pans — perpetual renters who refuse to grow up. But the truth is quite the opposite.

Today, 86% of millennials believe the benefits of owning a home outweigh the drawbacks. (1) And, the latest available Census data indicates that the majority of older millennials already own a home. In fact, prior to the COVID-19 pandemic, millennials were forecast to surpass 50% of all home purchase mortgages in 2020, proving that they have already become a driving force in the real estate market.

There isn’t a lack of intention to continue buying, either: 70% of millennials ages 22 to 37 said they expect to buy a home, and 40% of them are already saving to do so. (2) With that said, saving for a down payment is one of the biggest hurdles for this generation, as they have statistically shown less ability to save large amounts of money. (Their continued struggles with downturns in the economy don’t help.) Millennials’ relative lack of savings could make things more expensive overall for them when they do buy, as the housing market has been rebounding and climbing for about eight years, making the available housing stock more expensive for everyone.

Millennials are also becoming suburbanites, and they are OK with it.

For a generation known to love city living, millennials are moving to the suburbs in droves. And it isn’t just the high cost of cities driving them there: The oldest millennials are 39 in 2020, and many are at a point where the family- and pet-friendly amenities of the suburbs are too good to pass up. It’s also worth noting that more than eight in 10 millennials bought single-family detached homes in the suburbs because of the opportunity it offered to build from scratch with new construction.

But just because millennials are fleeing to the suburbs doesn’t mean they want the same suburban experience of decades past. Their utopia can best be described as “hipsturbia” — a cool suburban area with a vibrant downtown as well as live/work/play environments. Walkability, public transit, restaurants and retail are also important to them. They’re redefining the suburbs to include all the elements of city living, just with single-family homes instead of apartments.

But millennials are still not a one-size-fits-all generation.

Even though they are in the same generation, it’s still unfair to lump all millennials into a group when it comes to homebuying preferences and priorities. Not all of them want to live in “hipsturbia.” Every year for at least the next five years, more first-time homebuyers will enter the market, and those on the younger end of the millennial generation will have different homebuying priorities and preferences.

What does this mean if you work in marketing? Whenever possible, continue to offer personalized experiences and education, arming this expansive generation with the tools they need to make informed decisions about homeownership.

After all, education is key.

Millennials are the most educated generation in history, with more than 23% holding a bachelor’s degree or higher. Despite that, many of them still worry about their generation’s lack of financial literacy. Fifty percent of them rate themselves as beginners or worse at personal financial management. Even older millennials did not exhibit much more confidence in their financial know-how than younger millennials, aged 25–30.

This suggests that millennials don’t lack desire to become a homeowner, but rather they lack confidence in knowing how to navigate the process financially. And if you address millennials from a place of education and insight, you stand to gain brand affinity with this generation.

(1) April 2019 Survey for Wells Fargo by The Harris Poll among 21-38s

(2) Morning Consult polling in March 2019 among non-homeowners

Explore more articles from Wray Ward.