Millennials Navigating the Competitive Housing Market in 2022
Unusual circumstances lead to unusual occurrences, and real estate wasn’t exempt from this in 2021. The average price of a home rose from just under $300k to $386k, but this didn’t suppress the demands from potential homebuyers, especially when many often paid more than the house’s listing price. In fact, the supply of homes for sale continues to plummet because it can’t keep up with consumers. Not only that, but it’s a struggle to build more houses: the National Association of Homebuilders (NAHB) stated that over 90% of home builders were experiencing shortages in building materials, and delays on supply shipments.
Predictions for the real estate housing market in 2022 reflect that while it might not match the previous year’s, the competition will still remain intense. Though there will be an increase in building supplies, make no mistake: it’s still currently a seller’s world, especially with regards to those experiecing first-time home buying. Housing affordability also remains a persistent issue: inflation alone has spiked the cost of rents, listing prices of houses, and mortgage rates. These factors all present challenges to the current and future major demographic of first-time home buyers: the Millenial Generation.
Millennials are now between the ages of 20 and 40. The older part of the demographic often began their post-grad careers around the time of The Great Recession. The younger part were the first digital natives who could experiment with social media, and heavily depend on digitization for personal, professional, and commercial means. Combined, they represent over a third of all homebuyers.
Though The Great Recession was over a decade ago, its effects impacted millennials more significantly relative to any other age demographic, despite their actions not being the cause of the economic decline. Staggering amounts of student debt, lagging income raises in a damaged economy, and a continuous increase in the cost of living have been inhibitors for them. The reason why many of them moved to big cities was for the sake of pursuing lucrative career opportunities that could only be found in them, even despite how it costs more to live in an urban area.
However, this isn’t to say that millennials should despair and feel discouraged from their disadvantages. After all, most first-time homebuyers today are millennials. Older millennials in particular are trading their rent payment for mortgages as they shift over to home-ownership. Millennials also have a new advantage that the majority of previous generations didn’t have before: the emergence of the remote workplace.
Location-heavy factors like commute times are increasingly becoming irrelevant to millennials. The ability to work-from-home means the ability to work-from-anywhere, and millennials are using this opportunity to disperse from the urban centers that they were flooding into previously. They’re migrating from coast metropolises like New York and Los Angeles, to more inland locations like Austin and Boise in a movement that’s being called The Great Reshuffling.
Millennials are also the pioneers of The Great Resignation, a movement that began in 2021 where fed-up employees either quit or resign their jobs in mass numbers. Job recruiters, Talent Acquisition, and Human Resource managers are finding themselves at the mercy of potential hiring candidates because they need to fill in vacant seats for their workforces. Many millennials are using these circumstances to their advantage, as they’re put in a situation where they have a lot of leverage. Better work benefits and higher salary negotiations are allowing millennials to become more confident in their ability to become home-owners.
Millennials tend to bring in an urban sensibility to how they approach their home-search, even if they’re moving out into the suburbs. They tend to gravitate towards more low-maintenance properties that don’t require a lot of fixing up. Some even eschew from garden spaces and garages for the sake of having less to take care of around the house.
However, this doesn’t necessarily mean that all millennials are looking for smaller homes. Many are looking for properties that either have multiple units, or properties that can easily have units added to them. Multiple units allows for other family members like parents to have a space to live-in and provide things like childcare, which further helps reduce living expenses. Another advantage to having multiple units is that they can pull in some income; they an be rented out. This allows for home ownership costs to be more manageable. But even renting out units is being exchanged in favour of turning them into AirBnb spaces. AirBnbs have more flexibility with pricing, and hosts can charge significantly more, particularly duing peak seasons. With no lease agreements and protections that AirBnb offers, hosts don’t need to worry about their likelihood of having to take a tenant to court.
Millenials are also putting down less money on their first homes. While it’s traditionally advised that 20% should be put down on a mortgage payment, millennials are opting to put down half of that down– or even less. FHA loans can require as little as 3.5% down on a property. Even with PMI and higher interest rates, FHA loans are a viable way for millennials to get their first home without being overwhelmed by increased house listing prices.
Real estate agents also may need to rethink their personal branding if they want to appeal to millennials. Millennials are less concerned with quantitative aspects like number of sales, and care more about qualitative value that the agents can bring. For instance, Cash Jordan–a real estate agent whose social media handles go by the same name– uses social media platforms such as YouTube and Instagram to show esoteric NYC locations. He features a variety of NYC apartments, which intrigues millennials and makes them want to contact him. Millennials want their real estate agents to show genuine character, and to offer guidance throughout the entire home-buying process.
Socioeconomic changes brought on by the pandemic have amped up the heat of competition to the housing market, but millennials are stepping up to the plate and chasing after what they want. Millennials know where to find strength in adverse situations, and this strength enables them to be less intimidated by compromising situations. For this reason, they are becoming less and less overwhelmed at the idea of becoming home owners.
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