AND HERE’S WHY!
Millennials are redefining today’s era. They’re more woke, aware, independent, and technologically blessed to research everything in-depth. When it comes to investing in real estate, millennials are game-changers of home buying and mortgage markets by making the fastest-growing segment of buyers, according to a report by the National Association of Realtors.
Particularly in the age group of the late 20s to late 30s, they have defined their expenses and already built a roadmap to buying their own house. When compared to other age groups, this community has an income two to four times higher.
If we were to discuss the same topic a couple of years ago, the commitment-shy millennials would choose an on-the-go lifestyle over settling down and investing in a home. But the pandemic has encouraged the targeted group to invest, this has queered the pitch for buying houses around the United States.
So who are these young ones and how are they transforming the real estate market?
1. WHO ARE MILLENNIALS?
(Image source: Wall Street Journal)
A term for the generation born between 1981 to 1996, millennials are the most radically and ethically diverse adult generation in the nation’s history. They have grown up in the shadow of major life-changing events such as the 9/11 disaster that shook the nation, the wars of Iraq and Afghanistan, and one of the most politically-turning events when the US had its first black president elected in 2008, thanks to the youth force.
Beyond political and historical significance, millennials entered the age of the workforce facing the heights of economic recession. They bought along with the explosion of the internet era, welcoming the technology evolution of how people communicate and interact.
A detailed study by Pew Research defines where the millennial generation ends and where GenZ begins.
(Image source: Pew Research)
2. THANK THE TECHNOLOGY
(Image source: Houzeo.com)
Like we mentioned above, the millennial generation invented a blessing in disguise called the internet which led to a booming in technology and how! According to NAR, used the internet to get information about the home buying market. While Americans thought this day wouldn’t come anytime soon, millennial home-buyers are now ready and this has caused a major shift in the real estate market.
With the pandemic forcing us to be socially distanced, it forced people to rely on technology and buy homes online. Exploring more options meant smart investments and avoiding spending those extra bucks on bizarre realtors’ commissions, endless paperwork, and constant follow-up with agents to get interested buyers.
With things being digitized, millennials stumbled upon a life-saving method of buying and selling houses - flat fee multiple listing services. The best example of this is Houzeo’s flat fee MLS structure - save on commission by paying a fixed amount, have more control over your sale since this is a For Sale By Owner website, attract genuine buyers, get unlimited exposure, and promising service.
This might come off as an obvious fact but the figure is double that of baby boomers using the internet to explore home options.
3. MORTGAGE IS THE NEW NORM
(Image source: Investopedia.com)
In the past, people would normally go to banks or financial institutions to borrow loans or know more about mortgage plans. With everyone relying on the internet now, the youngster community has all simplified with tons of information populated on it.
Simpler interface, user-friendly information, quick digital communication, and on-demand service are some of the perks that this generation loves.
With evolving jobs and businesses, millennial homebuyers are experiencing a change in their lifestyle and for good. Buying their own home by applying for a mortgage is a risk they’re willing to take, and rightly so.
4. MILLENNIAL HOMEBUYERS LOVE OPTIONS
(Image source: Financial Express)
With a wide array of options available at your fingertips, millennial homebuyers love to be spoilt by choices. As opposed to the baby boomers, this young generation prefers to weigh the pros and cons of everything before they pin down one decision.
Be it buying a home online through real estate websites, exploring minimum mortgage rates, or finding the right real estate agent online, the internet has armed the shoppers with meaningful and accurate data to help them make smarter buying decisions.
On average, millennial homebuyers are now getting six different mortgage quotes as compared to three quotes to baby boomers, all thanks to the power of the internet. This has not only helped the buyers make conclusive decisions but also narrowed down the longer buying window.
5. EFFECTIVE TIPS FOR MILLENNIAL HOMEBUYERS
(Image source: Forbes)
With millennials redefining the home buying process through the internet, real estate tools, and everything in between, they do encounter some common hurdles while purchasing a home. As a millennial, here are some tips to tackle these hurdles strategically:
i) Manage Your Debt
One easy way to do this is by maintaining a monthly debt calendar and following it religiously. Keep a track of what you owe (student loans, credit card bills, etc) and add them to the calendar accordingly. Paying off every liability efficiently not only helps you strategically plan your finances but also improves your Debt-to-Income (DTI) ratio and enhances your credit score.
ii) Work On Building Your Credit
Want to qualify for competitive home loans? Work on building your credit score. To make sure your credit score is as high as possible, follow some simple steps like paying off your credit card bills and other debt payments on time and charging only those items on your credit card that you have the funds to pay back.
iii) Prepare For Down Payment
A pro tip from one millennial to another - start saving for down payment well in advance to combat affordability issues. As essential it is to save money for your down payment, it is even crucial millennials stay within their planned budget. Familiarize yourself with options and measure the pros and cons of every single step before making a decision.
iv) Research. Research. Research.
Digging in deep about your neighborhood, market prices, alternatives to heavy realtor commission, and staying updated with real estate trends is a fundamental part of purchasing a home. Researching more about the current real estate market situation simplifies the process of home buying and the reasoning behind some aspects of it.
THE BOTTOM LINE
(Image source: Forbes)
Millennials are changing the way real estate agents do their jobs. Because of the internet, they’re more familiar with basic real estate agent commission. To avoid paying heavy realtor commissions and added fees, they prefer flat fee MLS services or other real estate websites that provide more options and a seamless buying experience.
At times, purchasing a home could be overwhelming, especially when you’re new to this system. But don’t let these roadblocks discourage you. Stay true to your budget and research well. Do not hesitate to reach to an expert and get tailored advice to your situation. Explore alternatives and weigh the advantages and disadvantages of every little step.
Remember, you millennial homebuyers are characterizing the home buying process and your one positive or negative review makes an impact on the real estate industry.
This shift of patience and analysis could lead to a more streamlined process of home buying. It would be interesting to see if the increase in diversity among the homebuyers will increase or stagnate. Overall, millennials are treating the home buying process in a new and modern way which could lead to efficient changes and implementations in the real estate industry.