Roadblocks and Pathways to Homeownership
Millennials aspire to own a home, but there are obstacles to overcome. Green Builder Media’s survey data offers insights into problems and potential solutions.
When Vicky Weber and her husband needed to move 90 minutes from their previous community near Chicago, they knew tradeoffs would be required even though they already owned a home.
“We bought a little starter home in 2016, but three years later we moved to Lake County in the northern suburbs of Chicago,” says 30-year-old Weber, a children’s book author and writing coach. “We couldn’t afford even a starter home in the town we preferred, so we bought a house in a town about 15 minutes away.”
Besides swapping locations, Weber and her husband, who now have two children under the age of two, compromised by buying a fixer upper.
“We chose a house that was a little bigger than we needed and that needed work rather than buy another starter home and have to move again in a few years when we had kids,” Weber says. “We were extremely frugal so we could afford the payments and to make some improvements.”
Like many in the millennial generation, affordability was the biggest headwind Weber faced. Even though most millennials (86 percent) prefer to own a home than to rent, Green Builder Media’s most recent survey of homeowners and buyers found that 24 percent of millennials say they’re waiting on the economy to improve before they buy.
But while it may seem wise for someone to wait if they’re uncertain about their job, their income, or whether they will stay in a home or community for several years, it may also have negative consequences.
Home prices may continue to rise and mortgage rates may not fall as some prospective buyers hope. Rents may continue to increase in most markets, cutting into the ability of many renters to save for homeownership. Meanwhile, homeowners’ housing payments reduce their loan balance and build equity.
Millennials have become the prime homebuying group. But they face a slew of challenges, including finances, affordability, the economy, and even home design. Credit: iStock/Rudzhan Nagiev
Housing Affordability Conundrum
Unless they’re flush with cash, a prospective buyer will typically need to make concessions to afford a house—especially their first one. Julie Navitka, 39, owner of the Successfully Sustainable blog, opted for a fixer upper like Weber but chose an affordable older neighborhood in Winnipeg, Manitoba, Canada.
“In Winnipeg, many people don’t want to live in or purchase a home that’s centrally located because the homes are older and require more maintenance or upgrades, and because some people view the city center as dangerous,” Navitka says. “There are some less-than-ideal areas, but in my opinion, too many people based this belief on rumor rather than experience.”
Often, the priorities of millennial buyers run counter to affordability, says Kelly Mangold, principal of RCLCO, a real estate consulting firm based in Bethesda, Md.
“Millennials tend to look for more space because they have a growing family or want outdoor space,” Mangold says. “School quality is also important, and so is living in a mixed-use community with amenities within walking distance.”
One pathway out of the affordability roadblock could be a planned community in a more-distant location, as long as there’s a town center nearby, Mangold says. She says young buyers are often willing to live on a smaller lot with more density as long as the home has access to parks, trails, and a few restaurants and coffee shops.
“People’s priorities changed when they stopped needing to commute to work every day, so they’re more willing to ‘drive until you qualify’ today than they were a few years ago,” Mangold says.
Green Builder Media’s COGNITION Smart Data found that the spaces where millennials spend the most time at home are outside, in a home office, and in their living room rather than the kitchen. Another pathway to affordability could be a smaller, more-efficient floor plan that emphasizes outdoor space and the home office, Mangold says.
“Builders can also consider going for a nice look while maybe cutting corners on high-end features,” Mangold says. “It can be more cost-effective to focus on the things that are more noticeable and that make a house more comfortable to live in.”
As a compromise between high cost and nearby locale, many millennials are choosing fixer uppers for their first homes. Credit: iStock/Viktorcvetkovic
Climate Worries and Remedies
Location considerations are about more than affordability, though. Fifty-eight percent of of millennials said they considered moving due to climate change, according to the survey, and 61 percent said they’re concerned about climate change impacting the value of their home.
When shopping for a new home, 30 percent of millennials said exposure to climate events would be one of the top three negative factors weighing against a purchase. And yet, migration patterns show that Texas and Florida, two states prone to hurricanes, extreme heat and other climate events, continue to experience the most in-migration.
“The concept of ‘intertemporal discounting’ refers to the idea that we value things in the present more than the future, especially when we’re making choices,” says Ezra Markowitz, PhD, a professor at University of Massachusetts Amherst who researches environmental decision-making. “People are concerned about climate change but most events such as a major hurricane are rare. Even things like more torrential rain and sunny day flooding are not that frequent in any given place.”
Markowitz says people tend to assume that a hurricane or major flood won’t occur again in the same place, or they think someone will solve the issue before it impacts them.
“The perceived physical and financial risk doesn’t loom large enough,” he notes. “If anything, people assume there will be a slow change in their property values that won’t directly impact them.”
To combat that lack of urgency, Markowitz says groups such as Climate Central that provide risk information for things like wildfires, floods and sea level rise should continue to share tools with builders, real estate agents and consumers.
The desire to own a home is consistent across the four current consumer generations. But as respondent groups become younger, concerns about climate change grow. Source: Green Builder Media
When it comes to buying a house or retrofitting one with features that are resilient to climate events, Markowitz says that consumers often want sustainable features but aren’t always willing to pay for them.
“Many things that are good for sustainability and resilience are also good for the pocketbook, but sometimes they’re not that good right now,” Markowitz says. “The upfront cost of solar panels or triple-pane windows can be daunting, but almost everything has a payback over time. Builders often tell people what the breakeven point is over a certain number of years, but that only works for some people. Others just don’t hear it.”
The challenge, according to Markowitz, is that the upfront cost is immediate and has an emotional weight as well as a financial one. He recommends offering rebates and incentives into the initial cost as a solution.
“Maybe builders can front the money and then get repaid themselves later,” Markowitz says. “Builders can also use different language, such as saying ‘You’ll be making money in five years’ from solar panels rather than talking about paying off a debt.”
Mangold suggests that builders educate buyers on the sustainability and resilience features in their homes, especially if there’s a premium for these features.
“In one model home, a builder cut out part of a wall to show the difference between the insulation in that home versus the average home,” Mangold says.
Delay in the Great Conversion
Ending dependence on fossil fuels in residences by converting homes to all-electric systems is a top priority for sustainability experts and has been codified by many jurisdictions.
But this survey found that buying an all-electric home is a low priority for every generation, including millennials. When ranking features of a healthy home, less than one percent placed an all-electric home in first, second or third place. Most (60 percent) ranked an all-electric home as the 14th-most important out of 15 options.
The obstacle for many: the cost to convert.
“We have gas heat, gas cooking, and a gas fireplace, so even though I would rather have an all-electric house, I have no idea what it would entail or cost to change it,” Weber says. “I’d love to have solar panels, but we live in a homeowner’s association that rules what we can do and how. No one has solar panels.”
While it’s easier for newly built properties to be designed for all-electric appliances and systems from the start, another solution is for homeowner associations and jurisdictions to encourage conversions.
“Our province, Manitoba, uses electricity rather than gas for most home features now,” Navitka says. “Since our electricity all comes from hydroelectricity it’s very affordable.”
Navitka thinks that people with gas furnaces in her area are more likely to convert their systems to electric when they need to replace it, rather than proactively.
“Unless there’s a mandate to convert to electricity, I think we’ll see a more gradual conversion,” Mangold says. “The way to start is to educate people about the dangers of gas in their homes and to show them what it’s like to cook on an induction cooktop. People are afraid to invest in a big-ticket item like an induction cooktop if all they’ve ever experienced is gas.”
In Amherst, Mass., the library provides induction cooktops that people can borrow to test them out, says Markowitz.
While the roadblocks of affordability, building resilience to climate events, and electric conversions exist, digging into the priorities and psychology of buyers can unveil potential pathways through the obstacles.
Share It Boomer
Many baby boomers consider helping their millennial offspring in efforts to buy a home—after they have settled their own affairs. Credit: iStock/Zinkevych
The struggle to find an affordable house in the face of high prices and high mortgage rates can be particularly frustrating for millennials related to baby boomers who are sitting on a gold mine of home equity, especially if they own more than one property.
Twelve percent of baby boomers own at least one investment or vacation home in addition to the home they purchased in 2022, according to the National Association of Realtors’ 2023 Profile of Buyers and Sellers. Many of those parents and grandparents intend to support the next generation if they can, even though most don’t plan to sell any time soon. After all, they don’t want to give up a low mortgage rate and become buyers themselves in an expensive housing market.
According to a recent survey from Bank of America, Gen Xers and baby boomers who say they’ll actively help younger family members plan to:
- Give the next generation money to buy a home or give them their home to sell (38 percent).
- Pass down their home for the next generation to live in (36 percent).
- Offer to live together in a multigenerational space (12 percent).
Other options for boomers to consider, which weren’t mentioned in the survey, include co-signing a mortgage, financing a purchase with a low-interest intra-family loan, or a rent-to-own arrangement for a gradual transition to homeownership for the younger generation and some income for the older generation.
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