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Where Are the Generation Y Home Buyers?


Many buyers are delaying a decision to purchase a home because of the volatility of the real estate market. There is no larger category exhibiting this behavior than those of  Generation Y. To define this segment of the population, we go to Wikipedia:

Generation Y, also known as the Millennial Generation (or Millennials), Generation Next, Net Generation, or Echo Boomers, describes the demographic cohort following Generation X. There are no precise dates for when the Millennial generation starts and ends, and commentators have used birth dates ranging somewhere from the mid-1970s to the early 2000s.

Does this generation wish to own a home?

Yes. A recent survey completed by Trulia shows people between the ages of 18-34 still believe in the concept of home ownership. 65% of those surveyed said their American Dream includes owning a home”.

Where are these adults living?

Recent research form John Burns Real Estate Consulting shows the number of adults living with their parents has dramatically increased over the past eight years. Below is a graph showing the numbers:

 

Bottom Line

Generation Y believes in homeownership. Yet, they are delaying the decision to purchase a home of their own. When they do decide to buy, they will impact the housing market in a big way.

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22 Responses to “Where Are the Generation Y Home Buyers?”

  1. Marsha December 12, 2011 at 9:15 am # Reply

    Yes, it is true that Gen Y’ers believe in home ownership and they do not want to make the same mistakes that occurred in the past few years in real estate. They also do not want to be stressed out by home ownership whereas lifestyle is put on the back burn. Those professionals who can truly show them how to make a wise investment honestly and with interigity wins the buyers. The process needs to be as stress free as possible with long term rewards and benefits.

  2. RMG December 12, 2011 at 12:12 pm # Reply

    OK – I will dive in on this because I have had quite a few Gen Y people in my car. There are 3 problems here.
    1. They are coming of age where living standards are going down – not up. This is hard for them, I get it. But..
    2. They have come into this market with some very inflated expectations and a sense of entitlement that the previous generation didn’t have. They want what their parents have NOW right out of the starting gate. It took their parents a long time to get what they have. Even in better times this is very unrealistic.
    3. They need to find a neighborhood and a home – being overly concerned about finishes and granite kitchens is getting in the way of making sound decisions. They need to think clearly about what can be changed and what is set in stone and look beyond the fact that they might have to roll up their sleeves and do some actual WORK. Homes require care and no home is in “new” unless it is new construction.

    This group faces a lot of challenges, but they also have an awful lot of growing up to do. For the record…I’m not an old foggie, but I’m not young either. I see this group wandering around my county aimlessly going after homes that have all the bells and whistles but no substance. As one agent put it to me ‘They want their cake and ice cream before they have had their main meal.” The comment by Marsha is typical…They don’t want home ownership to impact their lifestyle at all. This is totally unrealistic.

    It’s a shame. I also see them blowing one of the biggest buying opportunities EVER and as rents rise, they will find the “lifestyle factor” becoming increasingly difficult. Meanwhile, they are missing out on a once in a lifetime opportunity with respect to affordability.

    • Claire Monahan December 12, 2011 at 2:12 pm # Reply

      As a Millenial who is interested in buying a home, I have to counter a few of these points as to why I am choosing to not buy a home yet. It’s not because I am picky about my granite countertops and finishes; in fact, the rental in which I live is DRASTICALLY below that standard, and I could pay $2-300 more a month to get it. Instead, I’m living the way I am now and saving that extra $200 to go toward the down payment of a home, which I will hopefully start seriously shopping for with in the next year or two.

      In fact, I’m pretty sure the main reason my generation is putting off buying a home is due to lack of security. We’re not buying a home *yet* because we are wary of trusting any market – job or home. Our reasons for buying a home are long-term; why would we buy a home in a neighborhood when so many have good reason to be nervous about job security? What if we don’t have this job in 5 years and have to move? How would we sell our homes then? While I love my city and my job, many of my generation do not have that privilege, and if something did happen job-wise, we don’t have anything tying us down to a city since we’re also putting off having kids.

      Just a few other thoughts. We realize that this is prime opportunity to buy a home, but the “what ifs” are more of what is holding us back – not our sense of entitlement.

      • RMG December 12, 2011 at 6:32 pm # Reply

        This could be in part a geographic issue. In our area this is definitely a big issue. I’ve had some people tell me its different depending on where you live. Living near a big city may create the issue. But I had a slew of 20 and 30 somethings who were so far over the top on what they felt they should get for their money – that it was just impossible. If it didn’t have a master suite with double sinks and tumbled marble – they thought they were “settling”. If the kitchen wasn’t loaded with stainless and granite, it was unacceptable. If they couldn’t literally roll out of bed and onto a train that too wasn’t acceptable, but they wanted a huge flat yard (near a train station???). One said that .4 miles was too far to walk to the train but she didn’t want to hear the train. I don’t know how that works but the only building I found that could create that situation was an older building which didn’t have an on-site gym, indoor parking or 24 hour doorman. I mean this wasn’t just a little over the top it was wildly crazily, insanely unrealistic. And it was always that age group. I would say around here about 10% had their feet on the ground. Older buyers were picky – as all buyers should be – but they understood that there were compromises and trade-offs and that a home is always a work in progress.

      • Wayne December 17, 2011 at 7:33 am # Reply

        I’m 46 and own a home, and you are 100% right Claire. Homes got expensive enough to require a 30-year mortgage when people could count on 30-year jobs. Now, with the average job lasting only 10-years, homes need to be priced where people can afford to pay them off in 10 years. Until the security in jobs balances the commitment to a mortgage, this housing market will never clear.

        • Finance_Fan January 12, 2012 at 11:53 pm # Reply

          “I’m 46 and own a home, and you are 100% right Claire. Homes got expensive enough to require a 30-year mortgage when people could count on 30-year jobs. Now, with the average job lasting only 10-years, homes need to be priced where people can afford to pay them off in 10 years. ”

          You are SO RIGHT!  this is something few people talk about, the craziness of taking a 30 year long mtg.  We are GenX and managed to save 3 times our income (which mind you, should be more than enough to pay for a decent home CASH).  Alas, it’s not.  So we will keep on waiting till prices come down to where incomes of 1st time homebuyers are.

          IMHO it’s the sellers lack of contact with reality what prevents real price discovery.  Boomers and older have NO CLUE WHATSOEVER when it comes to how low discretionary incomes of the 1st time homebuyers are once you take into account super high inflation on non-discretionary items like health care, education and childcare.  Also they have NO CLUE WHATSOEVER about the fact that GenX and GenY have to fully fund their own retirements.  When all is said and done, and these non-discretionary needs are taking out of wages that didn’t keep up with inflation, sellers realize that instead of a 2.7x household income, they will have to hope for about 1.5x income.  It’s still 3.6x income.   So we are getting paid to wait while prices keep on dropping.

          Another issue is that property taxes will keep on increasing much faster than inflation to cover for local unfunded pensions (teachers, police, firefighters).  Given that I can anticipate that, I’ll require a further cut so that the seller pays for that.  It’s a given as baby boomers are already retirement… 

          End of story: RENT!  See?  It’s not granite countertops, it’s about the total lack of financial responsibility of previous generations that comes back to hurt them.  It doesn’t take a genius to realize that inflation in health care, childcare and education plus unfunded pensions will end up hurting real estate, right?

          So yep, 1.5x income or a price that makes sense vs renting using a 10 year mortgage is what we are willing to offer.  Not a penny more :-)

  3. Mpowers December 12, 2011 at 8:25 pm # Reply

    I read a couple articles on Yahoo! Finance and Forbes explaining that the Millenials often cannot earn enough money to support their lifestyle and save for a home because of a lack in good jobs – due to the economy and the fact that the Boomer generation is working longer and jobs aren’t being freed up for them [us] to advance. A lower starting wage equals less overall income in a lifetime, which equals less purchasing power. I’m 27 with a bachelors degree, living at home with Mom, trying to sell real estate. I feel it on both ends and won’t personally be purchasing a home anytime soon.

    • Finance_Fan January 12, 2012 at 11:56 pm # Reply

      “I’m 27 with a bachelors degree, living at home with Mom, trying to sell real estate. I feel it on both ends and won’t personally be purchasing a home anytime soon.”

      My youngest brother also lives with my parents.  BEST DECISION EVER!  In fact, this year he will take a sabbatical and travel in great part thanks to saving so much in housing through the years.  If you are not married, don’t have kids… It’s smart financially, plain and simple.  Also my parents have some young energy around, which is good for them.

      Working in Real Estate though, I’m afraid will be a pain through this entire decade.  Wouldn’t you consider working on other sectors with more growth potential?  You are just starting!

  4. GenYer December 13, 2011 at 10:28 am # Reply

    Also something that no one has mentioned is that Gen Y is starting off in a huge hole due to student loans. Student loan debt is now higher than credit card debt. That, coupled with the fact that there aren’t any quality jobs out there has to have an impact on home purchasing…

    • Finance_Fan January 12, 2012 at 11:59 pm # Reply

      ” Gen Y is starting off in a huge hole due to student loans”

      Simply pass them on to the seller.  Education cost inflation is something that the seller accepted, he/she didn’t vote against it.  So, why doesn’t GenY get together and reduce the “asking price” by the entire amount of the Student Loans?  Chances are the seller is older and didn’t face Student Tuition inflation at all.  It’s wise to spread the pain :-)

  5. Tom December 13, 2011 at 11:02 am # Reply

    Experience is our teacher. While all the rest sit on the side lines there are people buying up property like it is a rare commodity. By the time the people sitting on the side lines decide to jump in on the great deals, there will be very few if any left for them to get and will end up paying more money for the same property they could have purchased for less.

    The other problem I do see is that people do want properties with all the bells and whistles but want to pay a price that would be for a property without them. A very unreasonable expectation. I blame the media for some of this as they have mislead the public to believe they can buy an ocean front condo in South Florida for under $100,000 as an example. I hear this all the time from people coming here from other countries. The truth is the three counties in South Florida have seen double digit increases in sales this year from last year and in certain areas prices are on the rise. Other parts of the country are still having Real Estate prices fall but it is only a matter of time before they see the same type of results that are seen in South Florida.

    If a basic house without the stainless and the granite are pricing at an average of $200,000 as an example, then you cannot expect to get a house with all the upgrades for the same price. People need to be educated in their market. Real Estate is a local market and that is why it is important to find a professional that knows and understands the area you are interested in buying in, to help guide you in making the right decisions based on reasonable expectations and not over blown media hype.

  6. Diane Malagreca December 19, 2011 at 6:27 pm # Reply

    Well there are a few different points of view below. However, I am practicing for ten years and I have worked with alot of different buyers, but the demographic I usually work with is the 25-35 age group. I am old enough to be their mother, all that aside. The expectations are sometimes unrealistic, however, if you gain their trust and are crediable in your explanations to them, they will if sincerely motivated begin to reassess their criteria. However, not all those who want to be homeowners should be. You need to have a down payment, albeit even if it is 3.5%, they should have their closing costs to lessen their monthly payment or if they do a seller’s concession, they MUST be able to afford the home with the PITI and the operating expenses i.e. gas, electric, phone, maintenance etc. As far as the comments of this generation being overindulged there is some truth to that, and they need to learn how to “suck it up” or do without the accoutrements if they want to be homeowners. You can’t have it all unless you can afford to have it all.

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