This piece originally appeared in the October 2023 edition of MortgagePoint magazine, online now.
It’s time to ditch the "forever renters" stereotype. Millennials have proven to be the homebuying demographic to watch over the past decade, representing the largest share of buyers from 2014 to 2022, according to data from the National Association of Realtors (NAR). Now roughly between the ages of 27- to 42-years-old, millennials are raising families, moving forward in their careers, and approaching or reaching their peak earning years. Their interest in homebuying remains strong, and they are poised to make a meaningful impact on the housing market.
Of course, millennials are not the only generation looking to purchase homes. Baby boomers (born 1946-1964) are high on buying, too—comprising the largest share of buyers and sellers from July 2021 to June 2022. And Gen Z’ers (born 1997-2012) are certainly hot on the heels of the millennial in terms of emerging demographics. Still, those looking to gain market share in the origination space know that understanding and appealing to millennials continues to be pivotal to success.
According to the 2023 ServiceLink State of Homebuying Report (SOHBR), millennials top the list of homebuyers considering purchasing a home or taking out a home equity loan in 2023. That in itself is a pretty good reason to get to know them better. Add to that the fact that these young customers will have a variety of financial needs throughout their lives.
The 2023 ServiceLink State of Homebuying Report survey was completed online among a panel of potential respondents who purchased a home, or tried to purchase a home, in the past three years. A total of 1,000 respondents, 18 years of age and older, completed the survey. Interviewing was conducted by Sago from January 7, 2023 to January 13, 2023.
Establishing relationships with millennials at this stage in their lives could mean years of repeat business, referrals, and revenue generation across multiple channels.
The following highlights of the SOHBR may help you gain additional insight into this highly influential subset of homebuyers.
Forget market challenges: Millennials want to buy
Despite high home prices and interest rates (or perhaps anticipating they may fall in the coming months), 60% of millennials shared their optimistic outlook that conditions are favorable for buying. In fact, 52% of all SOHBR respondents said they are open to purchasing a home in the near future. Of those respondents, 61% were millennials. Gen Xers (born 1965-1980) constituted 25% of the total, with Gen Z’ers (12%), and baby boomers (2%) accounting for the balance.
Millennials are the most likely of any generation to tap into their home equity
The surge in home values since 2020 has elevated many homeowners to equity-rich status. More than one in five SOHBR respondents (21%) said they have more than $100,000 in home equity. Another 41% reported having between $50,000 and $99,999 in tappable equity. Millennials are the most likely of any generation to take out a home equity loan: 49% said they would consider it, compared with 44% of Gen X, 41% of Gen Z, and 12% of baby boomers.
The bulk of respondents (73%) said they would use the money for home improvements, while 20% would pay off debt, including student loans. Interestingly, women were more likely to say they would earmark the funds for paying off debt, while men leaned more toward home improvements.
Millennials love leveraging technology throughout the mortgage process
It should not come as a surprise that, as a generation that has largely embraced technology, millennials have turned to it to facilitate a smoother homebuying process. What may be surprising is that a greater percentage of millennial SOHBR respondents have leveraged mortgage technology than their younger, Gen Z counterparts, as 60% of millennials said they had applied for a mortgage online, 50% had eSigned documents and 31% had closed remotely via a virtual platform. These figures compare with 45%, 36% and 16% respectively for Gen Z homebuyers.
The slight edge by millennials in terms of embracing technology over their Gen Z counterparts could, of course, be due to the fact that Gen Z is still coming of age, and not yet ready to enter the homebuying process (with the youngest of Gen Z still in middle school). We anticipate their influence on the home purchase process, and their participation in future SOHBR consumer surveys, will continue to grow in years to come.
What technology benefits do millennials covet most highly?
Convenience and ease of use (63%), time savings (59%), flexibility to make progress on their own schedules (51%), transparency into the process (49%) and cost savings (40%).
Millennials are embracing auctions as a means to make their homeownership and wealth-building dreams come true
The fierce competition for homes over the past few years has inspired homeowners to start exploring alternative channels. This exploration has led many to the courthouse steps, as well as online auction platforms to find homes to live in themselves, rent, or fix and flip.
More than one in three (39%) millennials said they would consider buying at auction, putting this group on par with all respondents (40%). That 40% represents a 7% increase over homebuyers who said the same in last year’s SOHBR. Primary motivations to buy at auction are the potential cost savings and a faster homebuying process.
Notably, this year’s SOHBR shows a dramatic swing in homebuyers’ potential usage of auction properties, as 50% now say they would use the home they purchase as their own primary residence, compared with just 29% a year ago. And where 31% said in 2022 they would fix and flip, only 20% have that intention in 2023. Looking to an auction property as an opportunity to generate rental income held steady in 2023 at 23%, exactly the same as in 2022.
Millennials are growing increasingly savvy in the homebuying space
As the millennial generation continues to mature, their accumulating knowledge in the homebuying space positions them to exercise good judgment in assessing and acting upon opportunities and challenges.
- When interest rates were low, millennials jumped on the opportunity to refinance. Forty-nine percent reported having refinanced over the past three years.
- When conditions have not been as favorable, millennials have taken a wait-and-see approach in anticipation of better opportunities to come. Of those who considered but abandoned the idea of buying a home due to the high prices and/or mortgage rates of 2022, 58% were millennials. (Keep in mind these consumers want to buy; they just haven’t closed the deal yet.)
- As mentioned above, this buying group is eager to leverage their home equity, enthusiastically embracing technology and opening their minds to alternative paths to homeownership.
In total, the SOHBR findings strongly suggest that the millennial generation continues to wield strong influence and hold tremendous market potential. Given their age and stage of life, they promise to be a driving force in the mortgage industry for years to come.