We may have a few months to go until the end of 2016, but the housing market is already looking forward to the year ahead. According a recent report conducted by Zillow, and findings from the National Association of Realtors, first-time home buyers are poised to make up half of the overall housing market in 2017.
The survey from Zillow found that nearly half of the homes purchased last year — around 47% — could be attributed to first-time buyers. Other industry estimates had initially put this number at a much lower percentage, which means that these first-time buyers are making up a much more significant portion of the housing market than originally anticipated.
One reason for this is that millennials are entering the housing market in droves. Of all the prospective buyers who took part in a survey from the National Association of Realtors, 61% are under age 35. Similarly, Zillow found that most of 2016’s growth in this area could be attributed to sales from couples who are in their 30s and buying a home for the first time. Those in the industry hope that current millennials, aged 18 to 34, could help to support the housing market.
Millennials are starting trends of their own, too. They’re a much more diverse market and are thinking outside the idea of a traditional starter home. Instead of buying a smaller and less expensive first house, the median for millennial home price and size is nearly identical to that of buyers from an older age bracket.
Generally, they’re willing to pay more in order to get what they want — which is not so different from the qualities found in more experienced buyers. Like many other buyers, younger potential homeowners typically want aesthetically pleasing features, as well as technological advancements. Wholly 54% of prospective buyers are willing to pay more for hardwood flooring in a home, and millennials are no different in that regard. But they’re also leading the charge in terms of adopting smart home devices. In this sense, millennial home buyers are not willing to wait long to acquire their ideal home.
Millennials have cited marriage, moving in with a partner, dissatisfaction with their current location, and increasing family size as the main reasons for entering the housing market. Surprisingly, millennials still want to live in the ‘burbs: only one-fourth currently own homes in urban areas, and nearly half live in the suburbs.
As these buyers enter the market over the next few months, it’s important for sellers and realtors to appeal to their sensibilities. Affordability and mortgage qualification will become increasingly vital for these first-time buyers. Time will tell whether the market conditions will be favorable for millennials in the next year.