Real estate trends seem to change dramatically every year. In some years it’s a buyers’ market, when it’s more beneficial for people to buy homes. In other years, like we’re facing now, it’s a sellers’ market. Competition is stiff and people can expect to profit more from properties they’ve purchased in the past. In this environment, how do millennials support a strong home building market?
The housing market is shifting as this generation chooses to buy — or, increasingly, build — their first homes.
New Financial Obstacles to Homeownership
Regardless of what the media would have you believe, millennials aren’t kids anymore. The youngest members of this generation turn 22 in 2018. They’ve long since graduated high school, gone on to college and even started families. Although renting is still extremely popular, these families are in need of homes to grow in.
There are plenty of millennial stereotypes to go around, with plenty of overstated reports about the generation’s financial flaws. The most significant barrier standing between millennials and their dream home isn’t avocado toast, however — it’s student loan debt.
More than 63 percent of millennials have more than $10,000 in student loan debt — collectively, Americans carry more than $1.2 trillion in student loans. It’s hard to get a home loan when you’ve got thousands of dollars in debt hanging over your head.
This is even more challenging when the current market doesn’t contain homes that younger buyers desire. That is why many millennials are starting to build their own homes instead.
Build Instead of Buy
America is facing a housing shortage. Homeowners aren’t selling because interest rates are rising, and a new mortgage would come with an interest rate higher than the one they’re paying now. This makes it hard for millennials who are looking to buy their first home to find a property that suits their needs.
Building a home is an option many millennials are choosing instead — and this isn’t just good for them. On their end, they can design the home of their dreams and build it to their specifications. In a larger context, this also helps bolster the economy. According to 2014 estimates, building a single-family home generated nearly three jobs and just over $110,000 in taxes.
A strong home building market is great news for the country. Any time new building projects are undertaken, the jobs and revenue generated contribute to economic growth. Even spending $100,000 on remodeling an existing property generates nearly $30,000 in taxes.
The Growth of Green Building
Furthermore, young homebuyers are also fueling a quickly-growing sector of the housing market: green building and renovation. One third of builders report that green building is more than 60 percent of their total portfolio, a figure that the NAHB reports is only predicted to rise. This opens up opportunities for both traditional and more specialized builders to reach a market of green-conscious young homeowners.
Green homes are attractive not only because young homebuyers are relatively eco-conscious, but also because they have the potential to save their inhabitants hundreds of dollars in energy costs. Energy-saving appliances and elements like solar panels can be easily included right from the start. In our current market, retrofitting older homes is often prohibitively expensive.
Leaving Cities Behind
Even if millennials have the funds or the borrowing power to purchase or build a home in an urban area, many of them are choosing to leave the city lights behind them in favor of a more affordable life in the suburbs. These areas are more cost-effective, and also tend to offer more pedestrian-friendly shopping and transportation options, which is vital for the eco-minded millennial.
These suburban areas also offer better schools, something millennials are looking for when purchasing or building a single-family home. Saving money is great, but it doesn’t mean much if their new home isn’t in a decent school zone for their children.
For those who are purchasing a pre-existing property, homes that are in the suburbs tend to be in better shape than their counterparts within the city limits. They often haven’t seen as many tenants over the years, so there is less wear and tear on the property.
Millennials Support A Strong Home Building Market
Millennials have a bad — and undeserved — reputation as the entitled generation. But industry trends indicate that millennials support a strong home building market with effects that ripple into the larger economy. Their tenacity in overcoming debts and moving into homeownership might be just what the housing industry needs to turn itself around.