Millennials are often criticized for holding off on homeownership, but it looks like that notion may be just another myth. In fact, according to one recent survey, they’re actually the largest group of homebuyers, making up 34% of the entire housing market. But the reasons for their ability to buy a home — and why they want to do so in the first place — may be a bit surprising.
Unless, that is, you’ve been carefully watching the real estate market like Home Depot CFO Carol B. Tome, who says the power shift isn’t the least bit surprising.
“First-time home buyers have come back,” Tome told The Street, “And some of those homes are being bought by millennials. It’s what we thought would happen. People were saying millennials would never buy a home. Yet, we had done all this research on it and thought it would happen. It’s not that millennials didn’t want to buy a home ever; it was just a matter of when. Now it’s happening.”
But not every millennial has the same reason for purchasing a house. For some, a recent change to student loan debt-to-income ratios made a positive impact. Now that the debt limits for Fannie Mae and Freddie Mac have been raised from 45% to 50%, many borrowers can now qualify for a home loan even if they have outstanding student debts. The Fed estimates that if student loan debt remained as low as it did 15 years ago, approximately 360,000 more millennials would have purchased a home in 2015.
In addition, millennials are also especially likely to buy fixer-upper properties. While only 2% of people say they’ve achieved their ultimate decor vision for their home, many young people want properties they can change to their liking.
Millennial Priorities: A Big Backyard for the Dog > a Dream Wedding
A recent survey conducted by Harris Poll indicates that millennials may also have additional motivations for homeownership. According to those results, it seems as if their fur babies play a significant role in buying a house. In fact, 33% of millennial home buying decisions were driven mainly by their dog, and 42% said that having a dog (either currently or in the future) would be a key factor in their choice of home. In contrast, only 25% cited marriage as their top reason for buying a home, and just 19% said their incentive was the birth of a child.
Some millennial couples even prioritize homeownership over having a big wedding. While an average of 44,230 weddings take place every weekend, The Knot reports that the average wedding costs $31,213. About half of that goes towards renting a venue. But the recommended 20% of a down payment on a $240,900 home would equate to $48,180. As a result, a lot of millennial couples are choosing to buy the home instead of the dream wedding.
Ariel Meadow Stallings, the publisher who runs Offbeat Bride, told Realtor.com, “We’re definitely seeing an increase in couples trying to make the most from their limited wedding budgets. Venue rentals can be a huge part of a wedding budget, so by bundling that cost into a real estate purchase, couples can turn a wedding expense into a longer-term real estate investment.”
Some data even shows that attending wedding-related events like bachelor and bachelorette parties could totally derail homeownership plans. When Zillow analyzed data from The Knot, they found that guests spent an average of $1,000 to $1,500 on these parties, including travel and lodgings. If an individual attends five to ten bachelor parties throughout their 20s and 30s, for instance, that could translate to more than $13,000 they could have put towards the down payment on a home.
The bottom line: a generation often mocked for entitlement and poor financial decisions seem to be prioritizing homeownership in greater numbers.
What’s Next for the Millennial Housing Market?
The millennial as renter isn’t the only stereotype falling apart in 2017. Despite the widespread belief that millennials only want to live in packed urban centers, new research shows that young homeowners are just as eager to live in the suburbs as their predecessors in Generation X.
“When they’re younger and renting, the central city is where they want to be. But when it’s time to buy the home, they want to go to the suburbs,” said Rose Quint, vice president of survey research at the National Association of Homebuilders, to NBC News. “They’re interested in park areas and that typically suburban neighborhood.”
There are obvious benefits to suburban living. If you want a big backyard for your pup, or if you want to be one of the 21.23 million people who live in a house with a pool, then you have to look outside the city center.
It’s clear that the winds are changing in the millennial generation’s favor. And as more young people pay off their student loans, the number of millennials entering the housing market is only going to climb.