Millennials are said to be more focused on renting experiences rather than investing in real estate. There may be some truth to that statement, but it doesn’t mean millennials are going to rent forever. The major reason this generation postpones purchasing a property is because house prices are still far from what an average millennial can afford. Almost 70% of millennials said they simply cannot afford to buy a home.
Looking back at the 2008 financial crisis, the housing market went into freefall as a result of the recession and not vice versa. Though housing prices dropped significantly, many potential homebuyers didn't want to risk investing in real estate...so they kept on renting.
But will the post-coronavirus recession help millennials buy a home at bargain prices?
Prior to the COVID-19 outbreak, high-earning millennials weren’t in a big hurry to become homeowners. Even if they had accumulated savings and money for a down payment, homeownership didn’t seem like an attractive idea for many urban-dwelling young adults.
Objectively speaking, millennials aren’t ready to settle for less, but the properties they can actually afford are usually located mostly in areas with fewer career opportunities and less options for a thriving social life. That probably isn’t going to change- in New York and Washington, the prices are unlikely to fall this year. Along with that, the fear related to shady mortgage lenders and the negative experiences of the 2008 economic crash are still holding many back from purchasing a property.
The flexibility of renting an apartment and economic uncertainty used to be the key factors that encouraged this generation to remain long-term tenants and feel at ease with that. But the new reality made them reconsider their decision literally overnight.
For people who are starting to think about homeownership, this time period is a real challenge. The generation that got used to mobility and social interactions in the workplace is now stuck at home, having online meetings and yearning for more square footage. But because they are more adaptive to change than previous generations, embracing the new norms will only fire up their creativity, motivate them to better perform in remote jobs amid the crisis, or even think of making a long-term investment.
What would make millennials change their mind?
The corporate culture is being reshaped to meet the requirements of the current reality. Right now, more millennials are considering purchasing a home of their own due to remote working policies established in multiple companies.
The opportunity for telecommuting helped thousands of employees to avoid coronavirus layoffs. The companies that could move their business online without losing major income sources are in a sweet spot since they managed to save working places.
What are millennial home buyers looking for?
Once the coronavirus lockdown ends in most states, single-family housing will probably grow in popularity. While the millennials who don’t have a big family won’t necessarily need multiple bedrooms and a yard, renters who are now planning to start a family will most likely opt for a single-family house with enough space to create a comfortable home office.
For people who continue to rent, having an apartment with an efficient working space makes perfect sense and we may see people start looking for single-family rentals as well. After all, anyone can make avocado toasts or a soy milk latte at home- there’s no need to rent a place in a hipster district if you have enough financial means to look in a less expensive area.
Do you think that delay in homeownership is connected with the millennial mentality rather than high housing prices across the country?
What are your predictions for the future of millennial homeownership in the post-pandemic world?