Who is in the next up-and-coming block of first-time homebuyers? It’s Generation Y, the Millennials, born between 1980 and 1995. Until recently most stories involving Millennials and homebuying discussed how this age group was staying away from the housing market, but a March report from the National Association of Realtors found that they are now the biggest group of homebuyers, at 32% of all buyers.
The Government Wants People to Buy Homes
And to encourage that, they’ve made it a bit easier to do so. Fannie Mae and Freddie Mac offer a 97% LTV program for first-time buyers — that means only a 3% down payment, and that money can come from a gift.
The 3% down program is now in competition for clients with the FHA’s 3.5% down payment program. This is actually a long-standing offer for first-time buyers, made sweeter this year by the reduction in annual mortgage insurance premiums, ultimately making homebuying less expensive. Plus, FHA loans accept credit scores as low as 580 (and possibly lower, for a higher down payment). So there are several programs for Millennial first-time homebuyers to choose from.
But What Do Millennials Want in a Home?
Location, location, location. The location of the home can be almost more important than the features of the home itself. These twenty- to early thirtysomethings consider the home’s neighborhood and its proximity to their place of employment to be just as critical as the number of bedrooms. Consider both walkability and access to public transportation when working with this group.
Less space but the right space. Bigger is not better; many Millennials spend little time actually in their homes, which means a smaller property is just fine for them. Because of this, it’s important that spaces in the home have multifunctional purposes. Smaller spaces are also easier to repair and keep clean, which works well with this generation’s desire to minimize upkeep and spend more time enjoying life.
It’s not forever. Millennials aren’t getting attached to homes like older generations did; they look at them as a stepping stone and an investment. They don’t plan to stay in the home they’re buying now for more than five to seven years, in most cases (think repeat customer!). A first home is a chance to increase their credit scores and build their borrowing profile for the next property purchase. To these young homebuyers, a home is an investment: Keep this in mind as you work with your clients.
In a Nutshell
Lower credit scores and less cash for a down payment, but a high motivation factor and a willingness to start small and buy up over time are the general characteristics of the Generation Y homebuyer. Of course, another characteristic of this group is its dislike of being pigeonholed or profiled, so in order to succeed with this clientele, you need to be flexible and able to keep up with changing tastes and technology.
