Millennial homeowners bought smaller, cheaper, and closer
New research from economists at the National Association of Home Builders shows that Millennials tend to buy homes that are smaller, older, and less expensive than homes bought by older generations. Being the youngest homebuyers with little or no accumulated wealth also affects how Millennials shop and buy.
The majority of Millennials are buying homes for the first time in their lives. Three out of four who purchased a home were first-time buyers, and a quarter traded their existing homes.
Compared with older generations, Millennials are less likely to buy a new home. Less than 9 percent of Millennial homebuyers bought a new home; the share was close to 12 percent among older buyers. More than two-thirds of Millennials who bought homes purchased single-family detached properties. Nevertheless, compared to older buyers, this generation shows a slightly higher preference for multifamily condominiums. Close to 9 percent of young adult homebuyers bought a multifamily property compared to less than 6 percent of older homebuyers.
Consistent with being the youngest and largely first-time homebuyers, Millennials tend to buy homes that are, on average, smaller and concentrated in the lower price ranges compared to homes purchased by older generations. Half of all homes purchased by Millennials averaged less than 1,650 square feet of living space and cost less than $148,500.
The most common reason for moving reported by Millennial homebuyers is to establish their own household, followed by the desire to have a larger dwelling and to own it. When choosing a particular home, this group is more likely to let financial reasons influence their choice, while older generations consider size most often.
When selecting a new neighborhood, the right house most often influences the decision for both younger and older homebuyers. However, Millennials are more likely to also pay attention to proximity to work and the quality of neighborhood schools.
Unsurprisingly, when compared to older generations of buyers, Millennials are more likely to finance home purchases out of current income rather than out of accumulated wealth, and when taking out mortgages they are more likely to use unconventional zero-down mortgages.
The research is based on the 2013 American Housing Survey (AHS), the most recent release of this ongoing biennial housing data collection. Only housing units purchased in the two years preceding the 2013 AHS interviews were considered. Housing unit characteristics are tabulated by the age of the head of household, the person in whose name the housing unit is owned. Millennial homebuyers are householders that were 33 years old or younger in 2013 and bought homes within the two years prior to the AHS interviews. PB