Millennials aren’t necessarily in the full swing of buying homes yet (see graph), but the overall single-family market is slowly picking up and at least one Millennial bought her first home this past summer. That would be me, a 32-year old (borderline Millennial), married, mother of an awesome one year old boy.
My husband and I were transferred to Houston this summer and after two years renting in St. Louis, we decided to buy a home.
In 2013, we were transferred for work to St Louis, MO, for a two-year assignment. In St. Louis, we decided to rent – mostly because it was a temporary assignment. But finances also played a role as it does for many Millennials considering buying a home. We had student debt from our MBAs and were low on cash given the expenses of our wedding and honeymoon. In fact, lack of money for a down payment and already having too much debt are top reasons Millennials are not buying homes.
Another reason typically mentioned is the delay of getting married and having children. My husband and I had just been married and didn’t have any kids yet. Putting all those factors together, renting made the most sense.
Two years went by in St Louis and, as expected, we were transferred one more time for work. Now in Houston, TX, the question came up again: buy or rent?
This time a few new things were in play:
- This assignment would probably be between 3 to 5 years, so we knew we would be here longer.
- We now had a son, so our housing needs were a bit different.
- We had been able to pay off our student debt. In fact, we had some money saved up in the bank.
We were Millennials with kids, married, and in a good financial situation. This led us to lean toward buying over renting.
Another factor we considered was the real estate market. When we started looking at Houston, we noticed it was pretty affordable (not crazy expensive like NY, Boston or California) for both new builds and older remodeled homes. Houses here were in a similar price range to Atlanta and St Louis – two previous places we lived – and we felt we could find a 3 to 4 bedroom house for a reasonable price.
While houses to buy were available, finding a single-family rental was not as easy. The ones we found in our online search were more costly on a monthly basis than the estimated monthly mortgage payment for a similar house. In fact, according to Trulia's Rent vs. Buy Calculator, it is 25% cheaper to buy in Houston than to rent - very different from places like NY, where it is 9% more expensive to buy than to rent.
So we decided to buy and started our search. I reviewed over 50 houses online and once in Houston visited over 30 houses. After four intense house hunting days, we narrowed down the area we wanted and finally found a house we liked. We put in an offer and two days later signed the purchase contract. Securing financing and finally closing on the house took another month (I’ll have more details on that on my next blog).
But for now, I think there are some interesting insights based on my experience of buying a home. Overall, I believe Millennials will eventually buy homes, but the circumstances and timing have to be right. As many experts have said, it seems we are in a lull waiting to catch up with a generational gap, driven by delayed marriage and family formation.
Once Millennials start having children, secure stable jobs and pay off their debts, I think we will see a flood of Millennials entering the single-family market place. When that time comes, will we be ready to serve them?
Whether you're building homes or multi-family complexes, Millennials are critical to the future of the construction industry. Is your company ready to take them on?