When it comes to buying a home, it’s safe to say that many millennials are caught in a catch-22.
Even though more millennials associate buying a home with the “American Dream” than any other generation, the homeownership rate for Americans under age 35 is near record lows at just 34.7%. In other words, millennials seem to want to buy homes, but various factors have been preventing them in doing so.
Waiting until later in life to start families is one commonly-cited aspect of the story, but millennials are also saddled with student debt and low wages, which have prevented from from amassing any significant savings.
Despite these factors, the demographic evidence is compelling – and many experts are expecting a shift in millennial buying behavior in the coming years.
What Millennials Want in a Home
As the real estate sector becomes more focused on millennials, the market is keying in on an important question: what do millennials want in a home?
Today’s infographic from Northshore Fireplace has an interesting methodology to help us get started in thinking about this question. In late 2016, they commissioned a unique study on 1,000 millennials, representative of all 50 states, in which respondents played a hypothetical game.
Each prospective buyer was put in the following situation: they are starting with an average American home (20+ years old, three bedrooms, and two baths), but have a $300,000 budget to choose between 38 hypothetical property upgrades to get them closer to the home of their dreams.
Here is how millennials chose to spend those budgets:
The results are fascinating, and provide an interesting lens with which to think of real estate in the coming millennial era:
- The three most popular upgrades were also in the lowest cost category: new appliances (75%), large master bedroom (64%), and two-car garage (54%)
- The least popular upgrade was an above-ground pool (3%)
- Having solar power and an energy storage system also ranked relatively high at 47%
- Only 24% respondents cared about upgrading to have more land (1+ acres)
- Other popular options: luxury kitchen (46%), solid hardwood/stone flooring (45%), and finished basement (41%)
First, a baseline was established to represent the average American home. In this case, it was 20+ years old, and came with three bedrooms and two baths, a one car garage, an unfinished basement, and old appliances. All this sits on a quarter-acre lot in an average neighborhood, as part of an average school district. The approximate value of this home is $200,000.
Respondents were given $300,000 of play money to spend, using a hypothetical menu of 38 upgrades with a combined value of $1,000,000. This was represented on the survey by having 20 points to choose from, with each option costing one to three points (depending on how expensive it is).
Northshore Fireplace also rightly noted that real estate is highly subjective – and although in real life these different costs may vary, what is important in this context is how millennials value things within the vacuum of this game.
Article by Jeff Desjardins, Visual Capitalist