Millennials bear the brunt of worsening US housing market conditions
Photo: Robert Clark
Even as the overall US housing market softens, Millennials are facing the greatest challenges both as buyers and as sellers, according to the newly released 2018 Zillow Group Report on Consumer Housing Trends.
Despite record low inventory and rising home prices, Millennial sellers are the most likely to make concessions, change the date of their closing and have an offer fall through.
And after years of having control of the market, early signs of softening have many sellers worried that their struggles are likely to worsen in the coming years.
“These seller challenges don’t indicate we’re suddenly in a buyers’ market. We don’t expect market conditions to shift decidedly in favor of buyers until 2020 or later,” writes Zillow chief economist Dr. Svenja Gudell, in a statement.
Zillow surveyed more than 13,000 US home buyers, sellers, owners and renters about their homes — how they search for them, pay for them, maintain and improve them, and what aspirations and challenges drive their decision.
Millennial respondents — those ages 24 to 38 — were reportedly the least satisfied with the process of selling. The generational group is more likely to experience major life events such as marriage, childbirth, changing jobs or relocating for work than any previous generation.
“Millennials aren’t settling down as early as previous generations. They need to get more educated for the job market, so they’re getting post-graduate degrees. Millennials are less likely to sink roots down, which is what buying a home is, until they’re solvent,” Zillow senior economist Skylar Olsen tells Livabl.
Nearly 70 percent of Millennial sellers said the expense and stress of moving, making improvements or repairs to sell, selecting an agent and uprooting their family are compounded by the pressures of buying a new home at the same time.
Millennials are also the quickest generation to decide to sell, making that decision an average of 3 months faster than previous generations. Some 58 percent of them experience an offer fall through, compared with 41 percent of all sellers.
And 89 percent make concessions to complete a sale, such as lowering the price or paying some of the closing costs — compared with 83 percent of all sellers.
Unsurprisingly, 86 percent of Millennial sellers say they would do at least one thing differently if they could start the process over, compared to 67 percent of all sellers.
“Some 93 percent of Millennial buyers are happy with their purchase, compared to 85 or 86 percent of all buyers, which is a good indication that Millennials are likely happy just to be done with the stressful process after working so hard to buy,” says Olsen.
Market conditions are making a combined 31 percent of Millennial and Gen Z buyers live in an area they hadn’t previously considered due to affordability and low supply. Over a third say there aren’t any homes for sale in their “preferred” area, and 33 percent combined claim they are priced out.
Millennials make up the largest group of home sellers and about 42 percent of all buyers. Gen Z — ages 18 to 23 — already makes up three percent of all home buyers.
“Gen Z is aspirational, not necessarily realistic. Gen Z buyers are the exception not the rule, but the desire of Gen Z to become homeowners tells us that owning a home is still very much part of the American Dream,” says Olsen.
Meanwhile, renters are the most financially stressed, to the point where 48 percent cannot cover an unexpected expense of $1,000. A slowdown in rent growth has eased some of the pressure, but rent affordability is worse today than it’s ever been, making it difficult for younger renters — half are Millennials and 15 percent belong to Gen Z — to save for a down payment.
Faced with a move, 46 percent of all renters who uprooted this year say they considered buying a home. Younger generations overwhelmingly have the desire to buy despite affordability concerns. Fifty-two percent of Millennials respondents say they thought about buying a home during their last move, as did 49 percent of Gen Z respondents.
“Today’s market is very different from the market of previous generations. Home prices bounced back quickly from the bust, wage growth is lagging behind price appreciation and rents are as close to as unaffordable as they’ve ever been,” says Olsen.
All of these factors combined, means Millennial and Gen Z homebuyers will have a much harder time saving for a downpayment.
Olsen recommends first-time buyers learn how to make a budget and stick to it.
“The best advice is not to get caught up the flow of buying a home, but play defense and slow things down so you can really look at what you can truly afford monthly and in a downpayment,” suggests Olsen.
Click here to read the entire release.