Recently, the National Association of Realtors® (NAR) released their 2019 Home Buyer and Seller Generational Trends study, which revealed some interesting findings on different generation’s approaches to home buying. The data sheds some light on California’s own housing industry and challenges in finding available inventory. Here’s a breakdown by generation.
Millennials (age 23-38) account for 37 percent of all home buyers, which makes them the most active generation of buyers, as has been the case for the past six years.
This year, NAR split Millennials into two different cohorts because within their demographic segment, younger and older millennials show two distinct income segments and home buying trends.
Younger millennials (those in their 20s) represent about 11 percent of homebuyers. With a median household income of $71,200, they are purchasing the least expensive and smallest homes. The median home this generation is buying is 1,600 square feet at a price of $177,000. The younger millennials face the biggest challenge in buying a home because of the lack of affordable inventory in their price range.
With 47 percent of this cohort dealing with student loan debt, they say that saving for a down payment is the most challenging part of trying to buy a home. However, this generation is seeing the shortest delay in the time it does take for them to buy a home, at two years.
According to Lawrence Yun, the chief economist at NAR, “These buyers are the most likely to receive some or all of their down payment as a gift from family or friends, usually their parents. This could explain why their debt is not holding them back from homeownership as it is with other generations, who are less likely to receive down payment assistance.”
Of the younger millennials who bought homes, 20 percent were unmarried, which represented the highest percentage of single people buying homes in all of of the generation groups. Overall, only 8 percent of all buyers were unmarried.
According to the study, many young millennials are going straight from living with their parents to purchasing a home. It’s not uncommon for this generation to go from college back home to living with their parents.
“The high cost of rent and lack of affordable housing inventory is sending adult children back to their parents’ homes either out of necessity or an attempt to save money,” said Yun. “While these multi-generational homes may not be what a majority of Americans expect out of homeownership, this method allows younger potential buyers the opportunity to gain their financial footing and transition into homeownership. In fact, younger millennials are the most likely to move directly out of their parents’ homes into homeownership, circumventing renting altogether.”
Older millennials, or those in their 30s, show home buying behaviors that are a lot closer to Gen Xers (age 40-54), according to the study. Both of these groups are in prime earning years.
“Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this,” said Yun. “Their choices are falling more in line with their Gen X and boomer counterparts.”
The older millennials, representing 26 percent of home buyers, have a median household income of $101,200 and their median home purchase price is $274,000.
Student loan debt is also a barrier to home ownership for older millennials. Forty-two percent of them carry student loan debt, and the median amount is $30,000.
For the older millennials, 13 percent of the buyers were unmarried, which represented the second largest group of unmarried people buying homes after the younger millennial segment.
Older millennials are purchasing homes with their extended families in mind, the report found. Nine percent bought a multi-generational home to either take care of their aging parents or to be able to spend more time with them.
Gen Xers (age 40-54) represent 24 percent of home buyers. In their peak earning years, they have a median income of $111,100. This group is buying the most expensive homes, with a median price of $277,800. Like the older millennials, Gen Xers are also carrying student debt. Twenty seven percent of them are carrying student loan debt at a median amount of $30,000.
Eight percent for Gen X buyers are unmarried. Yet, married or single, they are the largest group who is buying multi-generational homes, at 52 percent. In addition to taking care of aging parents, Gen Xers are buying multi-generational homes to house their adult children.
While Gen Xers represent the largest group of home sellers, at around 25 percent, they are not downsizing because extended family is living with them or they’ve had trouble finding available smaller homes to buy. In addition, 15 percent of this segment said their homes are worth less than their mortgages, which is impacting their ability to sell.
Baby Boomers (age 55-75) represents a surprisingly large segment of home buyers at 32 percent, second only to millennials. Yet, when they buy, they’re only moving about 30 miles from their previous home to stay close to family and friends.
Unlike in earlier years, baby boomers are not downsizing by much when they do move – only by about 100-200 square feet. The reason is a lack of available smaller homes.
About 25 percent of older buyers, age 55 and up, are single females, the study found. “Many of these buyers are entering the market after a divorce, which is the case for younger boomers,” said Yun. And with the generation before the baby boomers, the silent generation, the death of a spouse has been an impetus for a move.
Working with Real Estate Agents
The vast majority of home buyers and sellers, regardless of age, sought the help of a real estate agent, the study found. A total of 92 percent of sellers used an agent and 87 percent of buyers did. And surprisingly, even with all of the new online services that help with home buying, 92 percent of younger millennials relied on the help of a real estate agent when purchasing their home.