Our generation is finally turning the corner, as we see millennials buying homes more than ever. In fact, millennials have been the largest share of homebuyers for the past years. And that number of is set to grow as studies point to an increase in millennial job confidence and income gains.
We’re moving out of our parent’s basement
The ugly stereotype of millennials living in their parent’s basement might have been true five years ago. Today, while a significant proportion of us still are encountering economic hardship, most of us are transitioning to independent adult living.
In some ways, it’s simple age progression: We’ve gotten to the point that we’re ready to be on our own because many of us are getting married and having children.
Years have rolled by, and many millennials are now over the age of 30, which means it’s prime time for love and procreation. According to the Fannie Mae Home Purchase Sentiment Index® (HPSI), almost half of home buyers 36 years and younger now have children under the age of 18 living with them.
As millennials take the plunge and purchase homes, they’re finding a market that is somewhat overheated. In recent years, price increases have been way above historical norms, due to low interest rates (read: cheap financing) and a lack of inventory. Despite fears of a growing real-estate bubble, millennials are gobbling up real estate more than any other living generation.
Generation urban hipster headed to the ’burbs
Luxury apartment complexes have been sprouting up around the country, especially in urban areas, in an attempt to cater to upwardly mobile millennials. Unfortunately, investors in these complexes may be way behind more recent trends.
Fannie Mae’s data shows that much like their Baby Boomer and Xer parents, millennials are headed for the suburbs. The HPSI points out that we’re starting to see an uptick in millennials who purchase single-family homes in the outer rings of our largest cities.
Confidence at historic highs
While some investors are avoiding real estate because it’s become expensive by some measures, confidence in the real-estate sector has hit a new all-time high. According to the HPSI, 66 percent of people think it’s a good time to buy. Also, a thin majority of respondents think it would be easy to get a mortgage.
As interest rates rise, the cost of borrowing is growing. But that doesn’t seem to be deterring millennials from making the biggest purchase of their lives. In fact, 66 percent of young people purchasing their humble abodes are first-time buyers and probably aren’t even aware of just how much real estate has appreciated since the Great Recession.
Even if prices are hovering at levels that make some uncomfortable, in the minds of many millennials, there are few barriers standing in the way of homeownership. Rents have gone up dramatically along with surging real-estate prices, so there’s little incentive for millions of millennials to keep renting. Even large student loan balances, which are extremely common among college educated millennials, aren’t stopping household formation.
Takeaway: Welcome to the age of the millennial consumer
The tipping point for millennial homeownership has arrived, as the market becomes more and more dominated by our growing consumer clout. But it’s not just real estate, as our fingerprints are all over the change we’re seeing across sectors throughout the economy.
As millennials come of age, the entire economy is evolving to better accommodate our demographic dominance. In sum, our national economic fate is quickly becoming tethered to our economic fate.
Welcome to the age of the millennial, where businesses and investors can no longer ignore our growing clout.
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