Porch report shows the power of Millennials in the housing market

August 10, 2018

By Porch.com

Millennials are frequently portrayed as millions of narcissistic, irresponsible, smartphone-wielding kids who reject all the trappings of adult life. A new study from Porch is challenging that.

Millennials are increasingly dominating every aspect of the U.S. economy, and the housing market is no exception. That’s why we developed Porch’s Millennial Home Buying Trend Report – an analysis that draws upon a wide range of sources to give you an accurate picture of trends in the Millennial housing market.

Millennials’ tastes and material circumstances distinguish them from home buyers in other generations, and this report discusses many of these differences and how you should interpret them (particularly if you’re planning to sell your home). But there’s another theme at its core: the remarkable similarities between Millennials and older generations when it comes to home ownership – one of the cornerstones of the American Dream.

These similarities have vast implications: From telling us that the housing market is poised to see a Millennial-driven home buying surge to demonstrating that Millennials are behaving a whole lot like their parents (as both consumers and productive members of society) as they settle into their prime working years.

These distinctions actually highlight how similar Millennials are to other generations – they’re moving out of their parents’ houses, having children, and moving into the suburbs.

Over the past year, more than half of Millennial home buyers purchased a suburban home, and they were slightly more likely than Gen Xers or young Baby Boomers to live in a small town. But the generations still have plenty in common when it comes to the location of their homes. For example, while 52 percent of buyers under the age of 37 bought a suburban home last year, the proportion for all buyers was 51 percent. And while 21 percent of Millennials opted for a small town, the proportion for all buyers was 22 percent (this number was pulled up by homeowners in the 63-71 and 72-92 age brackets).

For Millennial buyers, it’s important to be in a location that provides easy access to nearby employment opportunities, and this often means close proximity to a major urban hub (though, as we’ll soon see, the image of the urban Millennial is often exaggerated).

As more and more Millennials have children, they’re much more likely to be concerned with affordability and the quality of local school districts (as well as how close schools are to home). They’re even more interested in being close to friends and family than other generations – a fact that challenges preconceptions about Millennials as the “Me Me Me Generation.”

These distinctions actually highlight how similar Millennials are to other generations – they’re moving out of their parents’ houses, having children, and moving into the suburbs. While mountains of debt and a global recession have forced them to bypass many of the most important landmarks of adulthood, they’re circling back around and settling into the familiar patterns of American life.

Home improvement in the age of Millennials

According to survey data collected by Porch, the average American homeowner has spent more than $9,000 on home repairs and maintenance, while 20 percent have spent $13,000 or more. While 55% of homeowners try to do a job on their own before calling a professional, this can be a risky decision – only 31% report being able to finish these projects without encountering major problems.

"Every week, Porch helps homeowners complete tens-of-thousands of projects, and the most common reasons that projects end up costing more than they should are because they were either put off for too long, or were not done by a professional the first time around."
- Matt Ehrlichman, CEO of Porch

Houzz reports that 87 percent of homeowners who made renovations in 2016 hired a professional, including 85 percent of first-time homeowners – both numbers that increased from 2015. Moreover, when Houzz asked homeowners to name the biggest challenges they face in making renovations, almost 30 percent said “finding the right service providers.” This was the third-most-cited problem among survey respondents, beating out “staying on schedule,” “funding/ financing the project,” and “dealing with the unexpected.”

First-time home buyers (many of whom are Millennials) are also much more cost-conscious than other groups when it comes to hiring professional help, with 54 percent citing low cost as a factor in who they hire. But despite their financial constraints, Millennials are eager to renovate their homes. According to LightStream’s 2017 Home Improvement Survey (which is conducted by Harris Insights & Analytics), Millennials planned “home-improvement projects this year at a rate well above the national average” – 69 percent. What may be even more striking than the huge number of Millennials who are renovating their homes is the fact that the number has increased by 25 percent in just three years.

According to the Porch survey, 32 percent of homeowners have been delaying at least one home improvement project for a year or more. Moreover, 57 percent of homeowners say their home is still a “work in progress,” and the average home has nine repairs that need to be completed. A mere 10 percent of homeowners claim to be up to date with home maintenance.

Millennials are just getting started

While Millennials are less likely to be married, own a home, or have children than previous generations at the same age, Pew Research Center points out that their migration rates are lower than their predecessors at the same age. This is another way in which Millennials are confounding expectations: They have a reputation for being transient and restless, but they’re actually the least mobile young American adults in half a century. Millennials are moving so infrequently that they have brought the percentage of total movers in the U.S. down to a historic low (according to the U.S. Census Bureau).

According to a 2017 Zillow trend report, “An overwhelming majority (69 percent) of Millennials believe owning a home is an essential part of the American Dream – more so than any other generation.” The generation with a reputation for everything from nomadic moving patterns to a fondness for career mobility has ended up embracing one of the most familiar pillars of American domestic life.

Millennials’ relatively low rates of home ownership aren’t a reflection of different priorities – they’re a consequence of a once-in-a-century global recession. A January 2018 report from the Brookings Institution explains that home ownership rates were relatively stable from the 1960s until the start of the financial crisis, which “occurred just before most Millennials entered the market. This tamped down their homeownership rate compared with young adults at earlier ages, as high interest rates, a reluctance to buy, and debt or low savings prompted many Millennials to live with relatives or move to rental housing.”

An overwhelming majority (69 percent) of Millennials believe owning a home is an essential part of the American Dream – more so than any other generation.

It’s time to revisit many of the assumptions we have about Millennial homeowners – they aren’t doomed to perpetual poverty, they don’t want to have landlords for the rest of their lives, and their footprint in the American housing market will only continue to get larger.

Millennials are a powerful force in the modern housing market

In the third quarter of 2006, home ownership in the United States was at almost 70 percent – a rate that collapsed to 62.9 percent by 2016. But since the second quarter of 2016, it has climbed to 64.2 percent – the biggest spike in more than a decade.

New Millennial homeowners are major contributors to this turnaround. 29 Although the home ownership rate for Americans 35 and under is only 36 percent, this proportion jumped from 34.7 percent from 2016 to 2017 – by far the largest increase of any age group. And this trend won’t be leveling off any time soon.

As noted at the beginning of this report, 36 percent of the homes sold in the United States over the past year were purchased by Millennials. And by the end of 2018, Millennials are projected to take out 43 percent of the total mortgages – a proportion that will increase from 40 percent at the end of 2017.

This shouldn’t come as a surprise. While it has long been fashionable to argue that Millennials are vastly different from other generations – more self-absorbed, less mature, uninterested in traditional American family life, etc. – this stereotype is crumbling under the weight of the data.

As Millennials occupy a larger and larger share of the housing market, it’s essential to keep track of the ways their preferences are different from the generations that preceded them. But this doesn’t mean we should exaggerate and seek to amplify those differences.

Instead, we should recognize that Millennials share many of the most fundamental values and aspirations of their parents and grandparents – including the desire to get married, have children, and yes, own a home.

Read Porch's full Millennial Home Buying Trend Report

Seattle based Porch.com is a home services platform that helps people maintain their home and get projects done by connecting them with quality home improvemnt professionals. Porch is available nationwide online and serves as the exclusive in-store resource in over 1,720 Lowe's stores across the U.S. For more information about Porch visit https://porch.com

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