Millennials have become a powerful force in the housing market. Although they’re waiting longer to buy a house in general, younger millennials are now stepping into the ring to buy their first home, and many of their older peers have already purchased and sold a home once.
But millennial home buyers, who make up 34% of the market, are different from their predecessors in some important ways. For one, only 11% of millennials think they’ll stay put in the house they buy. They’re content to live in the suburbs (despite popular misconceptions), but favour walk-able neighbourhoods and modern amenities like smart tech. And real estate is more than ever a family affair, with many first-time home buyers (66% of which are millennials) are recruiting help from their parents as they step into the world of home ownership.
One of the biggest differences between millennials and previous generations is that they think small when it comes to real estate. Gone are the days when square footage was king – millennials are increasingly gravitating towards condos, townhouses, and small homes on modest lots.
Why Small Homes Are Big With Millennials
There’s a reason millennials think less and more – and, no, it’s not all about the tiny house trend. It’s a matter of practicality.
You don’t have to be a demographer to know the average family unit has changed a great deal over the last hundred years. Gone are the days when families boasted five or more children; for the latter half of the 20th century, 2.5 kids was the norm in Canada.
This trend has continued, and today, more and more families are choosing to have a single child – or none at all.
A three-person family doesn’t need a four-bedroom house. Millennials are instead opting to fit their exclusive brood into smaller, two-bedroom houses and condos.
It used to be that more square footage was better – after all, the space would appreciate in value, and a bigger home would net bigger returns on resale. But with the housing market more expensive than ever, and first-time buyers contending with student loans and other debts, going big is hardly an option.
However, the real estate market has been slow to catch up with this trend. In 2016, 90% of newly-built single-family homes still had three or more bedrooms.
Taking that into account, it’s no surprise home ownership is at an all-time low. Only 62% of Americans owned a home in 2017 (coinciding with the lowest recorded fertility rate in that country).
While both numbers have climbed a bit since last year’s drop, they aren’t likely to return to old norms.
Another trend on the heels of this is the aging population of baby boomers, who are already beginning to downsize to smaller abodes in retirement. The demand for smaller homes is only going to go up.
Together, these trends will likely have a long-term impact on the housing market. There’s a shortage of affordable, smaller homes on the market, and a slew of millennials lining up to buy them.
So don’t discount the value of that tiny lot in the suburbs – it could be worth more than its square footage lets on.