It's been a few years in the making, but millennials are starting to take over the real estate landscape. Believe it or not, this year, the youngest millennials are turning 22 years old—and the oldest are 37.
So what does this demographic mean for your brokerage—and why should they be at the forefront of your efforts?
Moving toward house ownership
This up-and-coming group of buyers is typically well-educated and well-informed, and stakes a large claim in the real estate market.
According to the 2018 Home Buyer and Seller Generational Trends Report from NAR, the majority of home buyers in the last few years have been millennials, at almost 36% of the market.
They're more likely than any other age group to associate home ownership with the American dream (according to this infographic), and many of them hope to buy their first homes in the next two to four years.
They’re also likely to purchase homes more frequently, according to the report from NAR. The overall median tenure in last year's report was 10 years, whereas the median millennial tenure was only six years.
This means that where the average homeowner would buy two homes in 25 years, for example, a millennial would be on house number four.
Why are they buying more houses?
There are a few contributing factors to the upswing in millennials buying houses. The most obvious is that this group is reaching the age where they're ready, both personally and financially, to start investing in real estate.
But what are the others?
In cities across North America, rent in urban areas is skyrocketing.
Why? In the last decade, San Francisco, for example, has seen six times as much job creation as housing unit creation—meaning that for every one apartment built in those years, there have been six new jobs. Demand is rising, and rent supply can’t keep up—meaning the cost of rent has risen drastically.
As rent becomes unaffordable, millennials are looking to buy homes instead.
New techniques for lending
According to an article from the University of Pennsylvania, fintech, the emerging financial services sector in today's industry, has played a role in the number of millennials buying homes.
"The way traditional lenders underwrote meant that there were a lot of well-qualified people who weren't able to get access to mortgage markets," said Richard Green, public policy professor and director of the University of Southern California's Lusk Center for Real Estate.
New techniques for underwriting people using data science has opened the door for many of these people to consider buying homes.
What does that mean for you?
All of this boils down to three key takeaways for your brokerage:
1. More millennials are able to buy homes
2. They're buying the majority of homes
3. They're buying homes almost twice as frequently
It's the perfect recipe for repeat customers at your brokerage—and the perfect reason to put your focus on this up-and-coming age group.
Stay tuned next time when we look into how you can target millennials with your brokerage!