Normally, millennials venturing into the real world would prioritize home ownership over everything, as was observed with the last generation. To this end, many real estate agents consider millennials as the way out of a stagnating real estate industry. However, for the better part of this group today, buying a home is way down the list of priorities. Smart real estate agents have read the signs and are becoming increasingly worried about the future of a once booming industry. And, in many ways, their fears may very well be realized, considering the emerging accommodation trends in the industry. Here is how millennials might very well destroy real estate.
Millennials may be the driving force of the global economy, but their finances do not reflect their ideal position. After numerous surveys, researchers have come to the conclusion that millennials are considerably poorer compared to the older generation. According to the Pew Research Center, families that are headed by people over the age of 65 have an average wealth of 75%. Families headed by people who are 35 years or younger, on the other hand, record a meager wealth of about 45%, 30% lower than the former. This basically means that millennials have less money to spare, especially for financially-draining purchases such as homes and cars.
Consequently, only about 76% of millennials own cars compared to 91% 30 years ago. While there are many factors that have been attributed to the wealth gap observed between millennials and the older generation, debts on student loans have been considered the primary culprit. Instead of saving up for a home, most millennials focus on repaying their loans immediately after graduating and securing employment.
These debts have been so inconveniencing that the average period taken to save for a 20% down payment on a home has risen to 10 years, from an average of five years. And, to make matters worse, an overwhelming 2/3 of all millennials set to graduate in the near future are already indebted, hence the situation can only get worse.
As it turns out, there is much more to urban living for millennials than just the hype of the cities. According to research conducted by Harvard University’s Joint Center for Housing Studies, millennials’ growing preference to live in urban centers is largely fueled by the money-making opportunities available in the cities. In a bid to make more money, the younger generation is preferring to rent apartments in the cities where money is in larger circulation as compared to the suburbs.
This trend has also triggered other lifestyle choices that work against the growth of the real estate industry. For example, many millennials are putting off having families because: they do not have the time and money, and urban rentals are not the best of places to bring up kids. This independent lifestyle leaves no incentive for millennials to purchase homes.
As a result, the real estate market has shrunk significantly, especially since millennials make up the larger portion of potential buyers. And, unlike in the past when this age group would eventually upgrade to better housing in the form of suburban homes, today’s young generation is extending their stay in urban centers, and this is further making the future of the real estate industry seem grimmer than it already is.
Realtors share some of the blame
Although it is true that most millennials are struggling financially, it does not mean that all are incapable of buying a home. Even those with the ability to do so don’t have the will, primarily because most homes are not in line with their progressive needs. Translation: the real estate industry is having difficulty understanding millennials needs. Eventually, the progressive needs of the younger generation may contribute to the downfall of the real estate industry, but the blame here should be shared by both parties.
In an industry that is both reactive (rather than pro-active) and slow-moving, most realtors are still focused on getting the best value for houses and less intent on giving the young generation the incentive it needs to actually make a purchase. This has been blamed mostly on a majority of realtors being older and out of touch with millennials needs; according to realtor.org, most real estate agents average 57 years and older, subsequently making it difficult for them to relate with millennials’ housing needs. Unlike the older generation, millennials are more concerned about amenities, a buzzing lifestyle, and functionality as compared to space.
Unfortunately, most realtors are more concerned about value per square foot. The quandary is that millennials are seemingly satisfied with small spaces, as long as it does not interfere with their lifestyles.
Saving the Real Estate Industry – The Way Forward
There is little hope for the real estate industry if it continues with its current trend, since the fact that millennials comprise a major portion of the market will not change any time soon. As such, the industry has to become pro-active and conform to the younger generation’s needs by taking all the aforementioned factors into consideration. To start with, realtors need to understand that space does not matter for most millennials. And, since space is one of the factors that determines a house’s value, it also functions as a deterrent for potential buyers as lack of money is the greatest obstacle for millennials seeking to buy homes.
Additionally, realtors need to take into account millennials’ fast-paced lifestyle and include amenities that would inspire them to buy. For example, Kyle Zeppelin, one of the most notable developers in Denver, realized the progressive needs of the younger generation and started working on housing units designed specifically for millennials. The trick was to come up with an urban village where these individuals can get everything they need. And, thanks to his pro-active thinking, he sold all units immediately after completion while other realtors are struggling to get clients’ attention. Depending on how you look at it, millennials may very well destroy the real estate market, or they may change how it operates based on how fast the industry conforms to their progressive needs.