What Investors Should Know about the Millennial Housing Market
What Investors Should Know About the Millennial Housing Market
The millennial generation is America’s largest demographic, making up nearly a quarter of the entire U.S. population.
In marketing circles, this group is considered a tad bit enigmatic. And, several studies have been established to understand how they live, buy and think. Real estate investors have taken notice as well and are modifying their marketing strategies.
John of Haas Properties presents us with the key takeaways:
• Older millennials now comprise 42% of homebuyers.
• When it comes to home ownership, millennials still fall behind baby boomers at 14%.
• Millennials comprise 50% of renters
• Neighborhood attributes, room to grow, experiences, affordability, and jobs are the key drivers in the millennial housing market.
Roughly aged 20 to 36, millennials face several challenges when it comes to entering the housing market. Such challenges include escalating home prices, low inventory and rising interest rates.
Yet, 50% of the largest generation in history is still “particularly motivated to buy.”Realtor.com estimates that millennials could account for 43% of those taking out a mortgage by the end of 2018.
On the flipside, the largest generation in history is still driving rental demand. According to Zillow, millennials make up about 50% of the renters’ population. But why is this? A couple of reasons can help explain this trend.
Reasons Why Many Millennials Are Choosing To Rent Than Buy
Would you rather rent an apartment or buy a home? If you said rent, then you’re no different to the 78% of millennials who have no plans to buy a home anytime soon. There are many reasons why this generation is deciding to rent instead of owning a home.
Some of the reasons are as follows:
• “I can’t get a mortgage.” Student debt is at an all-time high. By 2018, figures show that it had reached $1.4 trillion. And, this has obviously impacted the millennials’ ability, especially those with little credit history, to qualify for a mortgage loan.
• “It’s the only way I can afford this neighborhood.” Renting affords the opportunity to live in trendy or desirable neighborhoods. Millennials are attracted to factors like tolerance, diversity, and creativity and choose their residence based on these.
They want to live in neighborhoods where they can enjoy being themselves, meet people from different cultures and enjoy wide-ranging entertainment options.
• “I have more flexibility.” Another reason why many millennials are choosing to rent than buy is the freedom renting provides. For many, the option of picking up and moving when their lease is up is very attractive because it gives them less accountability and greater freedom.
• “It’s cheaper.” According to a survey conducted by Rent.com, 57% of millennials cited affordability as the most popular reason for choosing to rent.
What Investors Should Know
Planning to invest in rental housing? If so, then there a couple of things you should know about America’s largest population.
• Millennials breathe technology. There is no doubt that millennials stand out for their technology use. There is an app for just about everything. Be it for spending, budgeting, investing and pretty much everything in between.
As an investor, it’s therefore key to keep up with this trend when thinking of rental housing. Yes, it may seem daunting at first, but you may find the returns to be rewarding afterward.
In fact, millennials are so much into technology that they are willing to pay moreeach month for smart home features.
• Millennials want upgrades. According to a survey, 75% of millennials want new appliances. Doing things like upgrading laminate to granite or carpet to hardwood and trading out the stove can help you appeal to this group of renters.
Also, in this digital age, you need to ensure that your property is equipped with high-speed internet. Whether it’s for their career, social or entertainment needs, millennials will certainly appreciate it.
In addition, millennials are more likely to rent your property if your units have features such as:
o In-home office spaces
o Energy efficient appliances
o Open floor plans
o Hardwood or stone floors throughout
• Millennials are renting longer. Millennials are renting homes that they can grow into. They are looking for family-friendly properties that give them the feeling of a fully functioning home.
As such, as an investor, predicting their needs is key to your business’s success now and in the future. Millennials need energy-efficient upgrades, bathtubs, ample storage, and open space both within and outside the units.
Moreover, by providing millennial families with washer/dryer in every unit, trash rooms on each floor, and outdoor spaces to play and socialize, you can ensure they will find your home appealing to live in.
• Millennials find amenities appealing. While more and more millennials are movinginto the suburbs, they still want to live near city-like amenities. They want to stay in lively, walkable neighborhoods.
Adding a game room, a fitness room, or a dog run to a pet-friendly building can add great value to your property. Other quality investments you can add include:
o Monthly social events
o Smart home features
o Outdoor dining options
o Rooftop lounges
o Bike racks
o Green spaces
o Expansive pool decks for entertaining
o In-house business centers
From this information, it’s clear that more and more millennials are choosing to rent than buy. This is certainly good news for investors looking to provide rental housing. It’ll be interesting to see how the housing market will be shaped by this growing trend of millennial renters in the years to come.