Fabiola Castro's Blog
WASHINGTON – March 14, 2018 – Home purchases by millennials ticked up over the past year, but inventory constraints and higher housing costs kept their overall activity subdued and prevented some from leaving the more affordable confines of their Gen X and baby boomer parents' homes. The insights come from the National Association of Realtors® (NAR) 2018 Home Buyer and Seller Generational Trends Report, which evaluates the generational differences of recent home buyers and sellers.
The survey also found that millennial buyers prioritize living close to friends and family over a home's location and proximity to schools, and an overwhelming majority used a real estate agent to buy or sell a home.
Slightly more than a third of all home purchases were made by millennials over the past year (36 percent; 34 percent in 2017), which kept them the most active generation of buyers for the fifth consecutive year. Gen X buyers ranked second (26 percent; 28 percent in 2017), followed by baby boomers (32 percent; 30 percent in 2017) and the Silent Generation, those born between 1925 and 1945 (6 percent; 8 percent in 2017).
According to Lawrence Yun, NAR chief economist, this year's survey findings reveal both what it takes to be a successful millennial buyer in today's housing market, as well as why, even though sales to millennials reached an all-time survey high, stubbornly low inventory conditions pushed home prices out of reach for many. The result: An overall share of millennial buyers remains at an underperforming level.
Revealing the greater purchasing power needed over the past year, the typical millennial buyer in the survey had a higher household income ($88,200) than a year ago ($82,000) and purchased the same-sized home (1,800-square-feet) at a more expensive price ($220,000; $205,000 in 2017). Millennials also had higher student debt balances than in last year's survey, and slightly more of them said saving for a downpayment was the most difficult task in buying a home.
"Realtors throughout the country have noticed both the notable upturn in buyer interest from young adults over the past year, as well as mounting frustration once they begin actively searching for a home to buy," says Yun. "Prices keep rising for the limited number of listings on the market they can afford, which is creating stark competition, speedy price growth and the need to save more in order to buy."
According to Yun, "These challenging market conditions have caused – and will continue to cause – many aspiring millennial buyers to continue renting unless more Gen Xers decide to sell, and entry-level home construction picks up significantly."
Other key findings and notable generational trends of buyers and sellers this year
Younger boomers and Gen X buyers increasingly have children and parents living at home. Similar to previous years, younger boomers were the most likely to purchase a multi-generational home (20 percent), with a noteworthy rise in those indicating the top reason they did was for their adult children (above 18 years old) to live at home (39 percent; 30 percent in 2017), as well as their parents (22 percent; 18 percent in 2017).
The survey also found a growing a share of Gen X shoppers buying for multi-generational purposes (15 percent; 12 percent in 2017), with a big jump in the top reason being for their adult children (35 percent; 26 percent in 2017) and parents living with them (30 percent; 19 percent in 2017).
"Costly rents and growing student debt balances appear to make living at home more appealing, affordable and increasingly more common among young adults just entering the workforce," says Yun. "Even in situations where three generations are all cramped under the same roof, it can significantly help some millennials eventually transition straight to homeownership. Eighteen percent of millennial buyers in the survey said their family home was their previous living arrangement."
Friends and family matter for buyers both young and old
When deciding where to buy a home, quality of the neighborhood is the factor most influencing buyers of all ages, followed closely by convenience to a job for those up to working age (millennials to younger boomers). Interestingly, even more than the location and quality of a school, recent millennial buyers were just as likely as older boomers and the Silent Generation (at 43 percent) to consider proximity to friends and family.
"The sense of community and wanting friends and family nearby is a major factor for many homebuyers of all ages," says Yun. "Similar to Gen X buyers who have their parents living at home, millennial buyers with kids may seek the convenience of having family nearby to help raise their family."
Millennials buying condos in the city at a very low rate
The share of millennial buyers with at least one child continues to grow, at 52 percent in this year's survey and up from 49 percent a year ago and 43 percent in 2015. With the need for a larger house at an affordable price, over half of millennials bought in a suburban location (52 percent), while also being more likely than Gen Xers and younger boomers to choose a home in a small town. After climbing as high as 21 percent in 2015, only 15 percent of recent millennial buyers purchased a home in an urban area.
Led by Gen X (86 percent) and millennial buyers (85 percent), a detached single-family home continues to be the primary type of property purchased, and older and younger boomers were the most likely to buy a multi-family home. Only 2 percent of millennial buyers over the past year bought a condo.
"While there is an overall trend among households young and old to migrate towards urban areas, the very low production of new condos means there are few affordable options for buyers – especially millennials," says Yun.
Most buyers and sellers work with a real estate agent
Buyers and sellers across all age groups continue to seek the assistance of a real estate agent when buying and selling a home. At 90 percent, millennials were the most likely to purchase a home through a real estate agent, and help understanding the buying process was cited as the top benefit millennials said their agent provided (75 percent). Overall, at least 84 percent in every other generation worked with an agent to close the deal.
On the seller side, Gen X and older boomers were the most likely to use an agent (91 percent), followed closely by millennials (90 percent) and younger boomers (88 percent).
The near universal use of an agent to sell a home helped keep for-sale-by-owner transactions at their lowest share ever for the third straight year (8 percent).
"Especially in today's fast-moving housing market, consumers of all ages want a Realtor to guide them through the exhilarating, yet nerve-wracking experience of buying or selling a home," says NAR President Elizabeth Mendenhall.
© 2018 Florida Realtors®
The developers of Miami-Dade’s first condo building catering exclusively to a university have changed their minds.
University Bridge Residences, the planned 20-story condo tower at 740 SW 109th Ave. to house students and faculty of the Florida International University Tamiami campus, is being converted into rental apartments instead.
The project, which was announced last year, will offer a total of 886 units, ranging in size from studios to four-bedroom apartments.
Originally, nearly half of the building — 492 units — was being sold as condos priced from $190,000 to nearly $700,000 and available for purchase by anyone, including non-students. More than 150 units had already been sold by Cervera Real Estate, the exclusive broker on the project.
But Brian Pearl, principal and co-founder of Global City Development, said he and the two Toronto firms partnering on the project decided to switch to an all-rental model based on two factors: The new tax reform laws, which reduce corporate tax rates from 35 percent to 21 percent and could save companies millions of dollars, and a sizzling rental market in South Florida.
“It is unusual to make this kind of change after a project is underway,” Pearl said. “But the rental market has been getting stronger and stronger since we did the initial underwriting. And the change in tax laws at the end of last year had a substantial effect on our decision to hold the asset longterm instead of selling it to individual buyers.”
According to the March 2018 report by Abodo, the median rent for a one-bedroom apartment in Miami-Dade is $1,832 and two-bedrooms go for $2,447 — both above the national median rates of $1,038 and $1,257, respectively.
Because they are designed to house students and roommates, rents in the new building will be determined by the number of bedrooms instead of square footage. Rents will range from $1,500 for one-bedroom units to $1,000 per bedroom for four-bedroom units.
The building will include 600 parking spaces and 7,200 square feet of retail space on the ground floor.
Buyers who had put 20 percent down on a unit in the building will receive a full refund plus interest.
“We understand that developers have to make the best financial decisions available to them,” Alicia Cervera Lamadrid, managing partner and principal of Cervera Real Estate, said in a statement. “While we are disappointed that the units will not be sold as condominiums … we are glad to see the project still going ahead and filling the obvious need in the marketplace for student housing.”
Groundbreaking on University Bridge Residences is scheduled for June, with a targeted completion date of 2020, in time for the 2020-2021 fall semester.
Nearly 8 percent of the 42,000 students at the FIU Tamiami campus live in housing owned, operated or affiliated with the university, such as the 15-story 109 Tower building at 737 SW 109th Ave.