Millennials are moving away from big cars but the trend seems to be in reverse when it comes to housing: New surveys indicate that younger individuals are looking to get into a big home right off of the bat.
Bank of America conducted a nationwide survey of millennials—typically defined as those between the ages of 20 and 35—and found that 69 percent were willing to wait, rather than jumping for a smaller, “start-up” home.
It’s easy for some members of society to attribute this to the notorious need of millennials to have everything provided for them…but there’s also some sound financial logic behind the decision of the generation. Some may be planning ahead, for marriage and/or children, and don’t see any reason to invest in a smaller home if they’ll soon be moving on to something bigger. More than half of those surveyed believed that they wouldn’t be able to afford the kind of home they’d want.
“What the report brings out is the shift in how millennials are thinking about homeownership. A home is much more of an emotional decision and a life priority decision. Is this a place where I may ultimately want to retire?” said D. Steve Boland, Bank of America’s consumer lending executive.
There are other issues at play, of course, including rising levels of debt.
Around one third of those surveyed attributed the inability to buy to debt, much of which is the result of student loan payments. In what might be a surprise to some, more than half also claimed they’d be willing to make financial sacrifices to ensure that they could own the home they desired.
The findings of the survey are true, when actual real estate market statistics are taken into consideration. The National Association of Realtors reported that first-time homebuyers made up just 30 percent of purchases made during February 2016. The typical rate is around 40 percent.
It’s also possible that millennials are buying homes later, just like they’re doing many things. That demographic is getting married and having children at later ages than those who came before them. And those decisions may bring the trend full circle: The recession impacted millennials harder than anyone else, leading to a shortage in jobs and a slowing of wages, which surely impacted the decision to make serious financial investments.
Perhaps we’re overthinking things. One easy explanation is the lack of traditional “starter homes,” as housing inventory has increased on the higher end of the spending spectrum in recent years, rather than the lower end.