Diverging from the “get married, then buy a home” tradition, millennials in the U.S. are shifting their priorities based upon their financial possibilities and lifestyle preferences. Household trends over the last two decades show that first-time homebuyers are significantly different from how they used to be.
Tougher housing markets and financial obstacles are swaying millennials in the U.S. to either rent or live with their parents. After reviewing 20 years of first-time homebuyer trends, Harvard University reports that the median age of new homeowners in 2017 was 34. This is a slight change compared to 1997, when the median age was 32, but the characteristics of first-time homebuyers are also diversifying.
These variations align with the demographic shifts since the 1990s. Previously, couples got married first and then bought a home. However, nowadays, they buy a property before marriage and seem to form a household when they move in.
There are also fewer people buying a first-time home. In 1997, there were 2.13 million first-time homebuyers, representing 2.1% of U.S. households and 45% of home purchases that year. Fast forward to 2016, and numbers have dropped; there were 1.8 million people purchasing a home for the first time in 2016, representing 1.5% of households and 38.5% of home purchases that year.
Marital Status Trends Have Changed
The marital status of new homeowners has also changed notably over the years. In 1997, the share of married buyers was 61%. It hit its lowest point in 2013 with 46% before increasing in 2017 to slightly more than half of all buyers. Additionally, never-married homebuyers had a 35% share in 2017.
Delaying marriage and children might not be the only cause behind this shift. Young Americans now lean toward buying individually or with unmarried partners. Of millennial homebuyers younger than age 29, 15% are purchasing as unmarried couples. It’s also not uncommon for friends and siblings to merge their resources and take out a mortgage together, given high housing prices and out-of-reach down payments.
New Households Formed at Time of Purchase
More than one-fifth of first-time homebuyers formed a household at the time of purchase in 2017. This number has increased since 1997 – when it stood at 12% – and hit its peak in 2013 at 26%, of which 12% previously lived with family and 8% with another renter.
Whereas couples used to rent together and then enter homeownership, they now prefer to save money by living with their families. This is especially likely for college graduates, who are already battling student debt, underemployment and high rent.
The share of young grads moving back in with their parents increased from 19% in 2005 to 28% in 2016. Miami real estate recorded the highest share at 45%, followed by the New York housing market at 42%. For some, moving in with family means skipping starter homes and, instead, aiming for larger home acquisitions. At the same time, the share of college grads living with their partners plummeted from 44% to 34%.
Millennials Trade Quantity for Quality
How one chooses to form a household is not the only change among millennial preferences. According to a Business Insider report, in addition to wiping out starter homes, new homebuyers are also ditching big, suburban mansions for homes located within walking distance of their jobs.
This trend seems to resonate regardless of the financial status of millennials. Different design affinities and a need for downsizing – fueled by the evolution of available services today – are prompting the new generation of homebuyers to choose a different type of quality over quantity.
Though researches have not studied the underlying motives behind all of these shifts in the first-time homebuyer’s profile, they hint toward other possible changes, such as an increase in nontraditional households. With new generations influencing buying decisions and new trends in sight, it remains to be seen what the future holds for first-time homes.