Even as the COVID-19 pandemic destabilized the economy, the 2021 housing market was the hottest ever recorded in U.S. history. Home values rose 6% above the former highest increase of 14% in 2008. Millennial homebuyers enter this scorching-hot housing market as the largest share of home buyers among all generations, and many of them plan to use a real estate agent.
For real estate agents who want to successfully work with millennials, a new report on millennial home buyers highlights the unique challenges they face and the sacrifices they’ll make to own a home.
Millennials aren’t buying homes when planned
High prices forced millennial homebuyers into two distinct camps: 42% bought earlier than planned, and 42% deferred their purchase. Some homebuyers were reluctant to purchase because of high prices, while those who took the leap were keen to take advantage of low interest rates.
To further their budgets, millennials who bought homes used technology to expand their search area and look at homes in other cities and states. They were also more willing to compromise on their list of requirements for a home.
Millennials may be more willing to take risks because one-third plan to live in their homes five years or less, with many planning to sell after one year. That means you may have a repeat client. Cultivate a lasting relationship by helping them find the house of their dreams.
A majority of millennials (51%) expressed fear and anxiety about homeownership, so real estate agents may need to act as counselors and educators to reassure millennials about the home-buying process. Your local knowledge and expertise might ease some of their fears.
Millennials will take risks to own homes
Millennials are 20% more likely to buy a fixer-upper than boomers, but 25% regret their purchase.
Additionally, a whopping 90% of millennials would buy a house without seeing it in person first. Millennials would buy a home sight-unseen if:
- It was listed at a great price (56%)
- It was a new construction (56%)
- There were financial incentives, such as no closing costs, no inspection fees, or repair credits (49%)
- There were competing bids (48%)
- Interest rates were low (43%)
- They were unable or unwilling to travel (31%)
- They disliked their current living situation (24%)
The size of house millennials want is changing too as millennials spend less time at home. Desired square footage declined from 2,400 square feet in 2020 to 1,700 square feet in 2021.
Photos of a home are nice, but a professionally produced virtual tour is what 71% of millennials say they need before buying a home sight unseen. Realtors need staging, good lighting, and high-quality equipment to bring out the best in a property that needs work. That doesn’t mean disguising serious defects or tricking buyers. That approach is unethical and can have lasting consequences.
1 in 6 millennials would offer $100,000 over asking price on their dream home
Although 82% of millennials have more than $10,000 in savings — a 25% increase from 2020 — 92% of them have debt that affects their budgets. Approximately 70% of millennials owe more than $10,000, while one-third owes more than $50,000. That may explain why one-third of millennials plan to put down less than the 20% down payment recommended for buying a home.
Bidding wars are common in today’s market, and 46% of millennials expect to hit the top of their budget when buying a home. About 33% of new home buyers plan to purchase homes well above the median home price of $405,000. For their dream home, 1 in 6 millennials would pay $100,000 or more above asking price.
But more than 80% of millennials who purchased a home have regrets. The most common regret was buying in a bad location (40%), followed by expensive upkeep (30%) and confusion about home buying in general (29%).
As a real estate agent, the goal is not to get the biggest sale. It’s to find the best home to fit your client’s needs, wants, and budget. You are the professional with industry training who can help predict problems that budget-busting bids can cause.
Clients with a small budget might find themselves in a bidding war they cannot win. While dictating a client’s budget is not appropriate, you can help educate new home buyers about market conditions and what homes are worth so they can make financially sound decisions.
This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.
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