A recent study conducted by Fannie Mae found that Millennial and Generation Z home buyers look for smaller homes designed for more modest budgets. The market isn’t meeting the needs of these populations. Contrary to some opinions expressed, Millennials and Gen Z’ers say they do want to purchase homes and are excited at the possibility, but many are ill-equipped due to several factors. In fact, 88% of these individuals say they believe they will own a home someday. However, only 31% believe they will find a home in their price range.
The Study Findings
In 2019, Fannie Mae surveyed approximately 2,000 Millennial and Gen Z respondents. The study found that these age groups want to purchase homes, but several factors are causing them to feel blocked. First, they are dealing with significantly larger debt loads than previous generations linked to higher education. These debt loads restrict the ability to save and apply for a mortgage to purchase a home.
Second, these buyers’ needs aren’t being met by the current market. They want to purchase smaller homes that are better suited to modest budgets. However, builders continue to focus on luxury condominiums and large homes favored by the generation’s parents and grandparents.
Third, homeownership is linked more to emotional than financial components. Many respondents stated that they wanted to purchase a home because it was the best way to live the way they wanted. Other respondents also stated that a desire for a place where their kids could always come home if necessary.
Fourth, over two-thirds of these potential buyers are open to purchasing smaller homes. This figure comports with another study conducted by the Joint Center for Housing Studies, which anticipated a 7% increase in single homebuyers and a 6% increase in married buyers without children. These individuals will likely seek a house that is smaller to meet their needs. Moreover, 63% said they were open to “fixer-uppers” if they could finance the renovations.
Finally, many Millennials and Gen Z buyers assert that they were not aware of alternative financing options. For example, they were not aware they could apply for low-down-payment mortgages. Also, if they are veterans or members of other protected groups, they can apply for no-down-payment options.
The goal of the industry should be to educate this age-group on their options. Millennials and Gen Z present the real estate industry with unique opportunities to reignite homeownership as the American dream.
