When the Supremes sang “you’ll just have to wait,” they were talking about first love. But now for America’s largest generation, it also means buying that first home.
In 2019, the U.S. Census Bureau declared that millennials -- folks born between 1981 and 1996 -- had surpassed baby boomers as the nation’s largest age group. And the National Association of Realtors said last year that they also are now our largest group of homebuyers.
Bradley Nelson, chief marketing officer of Sotheby’s International Realty, told Bloomberg in a recent article titled “Millennials are Changing the Luxury Real Estate Market” [subscription required]: “They’re just as interested in owning a home. They just waited longer to buy their first one.”
These aren’t a boomer’s starter home
The oldest millennials turn 40 this year and the youngest 25, so a lot of them who have waited to make that first house purchase are hardly buying starter homes.
Nelson told Bloomberg: “In the past, people bought a modest property, lived in it until starting a family, and then traded up to a larger property. Millennials are finally coming out of the gate, and it’s not uncommon for the first purchase as a first-time homebuyer to be a multimillion-dollar luxury home in the U.S. or internationally.”
Like the rest of the market, demand has shrunk the ready supply of high-end homes, but that also represents opportunities for builders and investors who can get the right place ready at the right price.
“Inventories are at near-record lows in general, and especially for the homes with the features they’re looking for,” Sotheby’s Nelson says, adding that with “wealth creation growing and cost of capital declining, it’s a promising storm for the high-end housing market.”
Location, location, sustainable locations
Location and amenities are vital to this crowd of affluent buyers, part of a generation that’s not only more educated, makes more, and stands to inherit more than those who came before them, but are also tech-savvy and environmentally conscious, the Bloomberg report notes.
In search of quality of life, they also have the wherewithal to seek out what they want in smaller markets that offer natural and cultural amenities they can enjoy while working from home.
An ideal home to this particular buyer would be in say, Austin, Texas, or Park City, Utah -- just two examples of places that have seen uber-rapid price increases -- and would include energy-saving geothermal systems, solar panels, and green roofs.
“If a home is move-in ready and environmentally conscious and has a Tesla (NASDAQ: TSLA) charger installed in the garage, those homes are generating a premium, because you have so many buyers interested in competing for them,” Sotheby’s Nelson says.
The Millionacres bottom line
Obviously, most millennials are not buying gazillion-dollar houses in trendy techie and mountain markets, but what they’re after can be replicated to some measure in less expensive properties and towns.
Environmentally conscious and smart-home features can be built into any new house, and retrofitting isn’t out of the question, either, if the savvy real estate investor has the budget and market knowledge to make that pay in their locale.
Do it, and you just might find a bidding war break out over the house you bought or built as a short-term play. Or you might just stick around for a while. Sounds like a nice place to live.