Affordability, low down payments, and less-traditional secondary markets with an abundance of jobs and homes are just some of the things that millennials look for when purchasing a home, according to an analysis by Realtor.com. The analysis also found that millennials are taking on larger mortgages when compared with the older generations.
Millennials have also started looking beyond starter homes. Despite a lower median purchase price of $238,000 for a starter home compared to Gen-Xers and baby boomers, the analysis indicated that millennials were increasing their purchase price at a faster rate than previous generations, indicating more buying power.
They're also becoming the largest mortgage purchasers by the number of loans originated, "surpassing Generation X as their leader in January 2017. As 2018 came to a close, millennials took on nearly half of all new mortgages compared with 36 percent for Gen X and 17 percent for baby boomers."
Despite these growing numbers, the study indicated that millennial homebuying was driven by affordability, as this demographic tended to make lower down payments compared to other generations. The analysis indicated that down payments by millennials averaged 8.8 percent in December 2018, compared to 11.9 percent for Generation X and 17.7 percent for "the more equity-rich" baby boomers.
"Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market," said Javier Vivas, Director of Economic Research at realtor.com. "The stereotype that millennials primarily choose to buy homes and live in large metro areas isn't the reality. Results show millennials' expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful."
While Buffalo, Pittsburgh, Milwaukee, Cincinnati, and Columbus ranked among the top housing markets preferred by millennials, Gen X-ers purchased homes in strong job markets and secondary home markets. Los Angeles, Providence, Bridgeport, Jacksonville, and Atlanta ranked among the top five markets for Gen-Xers.
For baby boomers, the top five markets were Knoxville, Sacramento, Memphis, Oklahoma City, and Riverside.