Millennials are now the fastest growing segment of home buyers. The latest U.S. Census Bureau Housing Vacancies and Homeownership report revealed that the homeownership rate for 25 to 34-year-olds has increased from 36.5% in Q4-2018 to 37.6% in Q4-2019.1 With a median adjusted household income of $69,000, the millennial cohort also earns more than young adult households did at any time in the last 50 years.2 Now, with higher incomes and a desire to settle down and build families, millennials are making their way into suburban life (prepare for avocado toast shortages in your neighborhood!). Here are the top four ways that millennial tastes are shaping the modern housing market.
1. Millennials are willing to shop for over a year to find an acceptable home.
Surveys of home searching and buying experiences found that millennials are willing to shop for over a year to find an acceptable home. With a desire for both modern home technology and a location that fits their lifestyle, they are quite particular about their investments. However, this is not too surprising considering they just spent 10 years living with their parents and working as a barista in order to save up for their down payment!
A survey from the National Association of Home Builders on home buying preferences found that millennial home buyers preferring a brand-new home jumped from 28% in 2007 to 41% in 2018.3 Millennials do not have the appetite to buy a home and deal with remodeling it to fit their desires. A newly-built home, which often has a lower likelihood of a peril claim, will almost always be offered coverage by a home insurance carrier. A study by Insure.com found that newly-constructed homes on average come with a 35.5% decrease in insurance costs (an average $547 in savings!).4 Millennials are expected to enjoy lower insurance premiums coupled with higher rates of coverage.
2. Millennials want new homes with new technology.
The oldest segment of millennials (aged 27-36) are big fans of smart home concepts. 36% of them have already purchased a smart home or installed smart home products, while 58% of those who have not are interested in doing so.5 Many old neighborhoods in highly sought-after locations are being rebuilt to attract these millennial buyers. These homes are smart – with the refrigerator, oven, lights, water heater, and locks entirely integrated and wirelessly connected. Even barbeque grills are now being connected! (Did somebody say Amazon Alexa grilling burgers for the whole neighborhood? Who could complain about that?) In order to protect against potential power outages and network issues, these houses come with specialized closets where hubs, routers, servers, security systems, and backup power supplies are housed. Homes are even being prepared with empty conduits in order to provide control and transmission cabling for future technologies.
Smart homes, with features like water detection, humidity indicators, security systems, freeze detection indicators, and electrical monitoring, can also serve to protect both homeowners and insurers from potential losses. Home insurers will benefit from partnering with smart home technology companies in order to lower risk, and this will likely also result in lower premiums for consumers.
3. Millennials want homes and communities that are sustainable.
Surveys have demonstrated that millennials tend to be more environmentally conscious, so it is no surprise that they are the ones driving the green revolution in housing. Solar panels will continue to be more popular on single family homes, each unit with its own battery and power management system. This is likely to result in an increase in insurance premiums, as most homeowners insurance policies cover solar panels.
Residents will have their excess energy distributed throughout the neighborhood in order to sustain the community’s energy needs while also minimizing the impact on the grid. New and more efficient features and appliances will only use the minimum amount of energy required for a given task, reducing home energy usage by as much as 50%. Experts project that this may lead to an electrical energy surplus in less than 10 years!
4. Millennials expect a digital home buying experience.
Having grown up in a digital environment, millennials don’t want to spend days touring homes in person. Instead, they expect to shop for homes the same way they shop for everything else—online. In fact, according to a Real Estate in a Digital Age report, 99% of millennials start their home search online and 58% found their current home on a mobile device. 6 Responding to this trend, an increasing number of realtors and brokers are now creating digital platforms for home buyers to search for their next property. More lenders are rolling out digital mortgage platforms making it easier for consumers to apply for and manage their mortgages online. And insurers are joining the party too – companies like Lemonade are using artificial intelligence and behavioral economics to revolutionize the way millennials insure their homes.7
In conclusion, millennial tastes and habits are proving to shape the housing market in new and fascinating ways. Companies involved in the real estate ecosystem should tap into these trends quickly– or else risk missing out on the home purchasing power of a generation.
Sources:
- https://www.census.gov/housing/hvs/index.html
- https://www.pewresearch.org/fact-tank/2018/12/11/young-adult-households-are-earning-more-than-most-older-americans-did-at-the-same-age/
- https://www.nahbclassic.org/generic.aspx?sectionID=734&genericContentID=269080&channelID=311
- https://www.insure.com/home-insurance/home-insurance-and-building-a-new-home
- https://www.gfk.com/insights/infographic/infographic-smart-home-and-the-millennial-divide
- https://www.nar.realtor/sites/default/files/reports/2017/2017-real-estate-in-a-digital-age-03-10-2017.pdf
- https://www.forbes.com/sites/afdhelaziz/2020/03/09/the-power-of-purpose-how-lemonade-is-disrupting-insurance-with-goodness-and-a-new-foundation/#760d929f7288
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