The real estate market is undergoing a tremendous shift. This is because of changes in generational and social attitudes. The effect is that first time homebuyers are becoming fewer, as individuals will delay purchases until later in life. The Millennial generation is the classic example of this. These are individuals who were born between 1980 and 2000 and are now the most populous demographic group (i.e. 75.3 million versus 74.9 million Baby Boomers). They are highly educated and have different attitudes about shopping and consumption than their predecessors. The result is that that this segment will have a large impact on the real estate market and how different properties are bought and sold.
As the Founder and CEO of a Real Estate Crowdfunding platform, I’ve observed some of this impact first hand. And here is my take on the five ways in which millennials are already influencing the real estate market:
- They are more Tech Savvy: The millennial generation grew up during the rise of the Internet. Enter: technology. This means that they are not only comfortable with technology but also rely on it to communicate, stay informed and shop for clothing, music, books and now real estate. Accordingly, property owners, brokers and others involved in the purchase and sale of real estate will have to use the internet and technology to connect and even transact with millennials including virtual tours, mobile apps, online marketing and e-signature technologies. Zillow, Redfin and Docusign are just a few examples of technologies and websites that are transforming how properties are shown to and the way transactions are conducted with Millennials.
- They are Well Educated: The millennial generation is the most educated of any segment. According to a report released by the White House, 30% of millennials have a Bachelors degree. This is higher than the Baby Boomers (which accounts for 24%) and Generation X (which is 27%). The result is that they will ask more questions and want to comparison shop before purchasing a property. This will require greater amounts of transparency and data from property owners and realtors. Platforms and technologies like RealtyTrac are making it easier for these stakeholders to gather and present this data to millennials.
- They have Higher Amounts of Debt: In 2014, the total amount of student loan debt for millennials came in at $1 trillion. This is higher than previous generations’ thanks in part to rising tuition costs and room / board for college. The result is that this segment has higher amounts of debt to pay off while they are entering the workforce. This is leading them to delay the purchase of their first home by several years and instead rent or live with mom and dad. This in turn will drive the market for rentals especially in urban markets where more and more millennials are flocking.
- They want work, home and play to be within close proximity:Unlike the baby boomers and the gen x’ers, millennials don’t necessarily want a house, 2-car garage and backyard. Instead, they are flocking to urban, mixed-use environments where they can live, work and have fun all without having to get in a car. This in turn is influencing how real estate stakeholders are thinking of the physical environment and how new buildings and developments should be constructed within it. Big box retail and suburban developments are thus being replaced with clusters of walkable mixed-use developments that cater to this ever growing millennial appetite.
- They entered the Workforce before, during and after the Great Recession: Millennials entered the workforce during times of slow or no employment growth and economic challenges. They have also seen first hand the difficulties previous generations have experienced by over extending themselves during the housing crisis. These experiences and the challenges of finding a job are making them more conservative with their finances, including big purchases like cars and homes. We will see this begin to shift, however, as earnings and job prospects continue to improve and millennials pay down their debt.
Clearly the millennial generation will have a dramatic impact on the real estate market moving forward. This means that property owners, real estate professionals and lenders will have to change their basic strategies in order to close deals with this new demographic of buyers. These stakeholders will have to embrace and use technology effectively, think about the physical environment intelligently, and gain an understanding of how the great recession and large amounts of student debt are influencing consumption for millennials. And for those that can do this effectively, the risk is losing out on business with the most populous demographic group in the country.