Young home buyers remain optimistic and see their home as a good investment, while older buyers are more likely to trade down to a smaller property to match changing lifestyles, according to the 2014 National Association of Realtors® Home Buyer and Seller Generational Trends study, which evaluates the generational differences of recent home buyers and sellers.
Eight out of 10 recent buyers considered their home purchase a good financial investment, ranging from 87 percent for buyers age 33 and younger, to 74 percent for buyers 68 and older.
Lawrence Yun, NAR chief economist, says the Millennial generation, which is under the age of 34, is now entering the peak period in which people typically buy a first home. “Given that Millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand. Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people,” he says. “However, the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own.”
Twelve percent of all recent buyers had delayed their home purchase due to outstanding debt. Of the 20 percent of Millennial buyers who took longer to save for a down payment, 56 percent cited student loan debt as the biggest obstacle. Fifteen percent of buyers aged 34 to 48 had delayed buying, with 35 percent citing student debt and 46 percent citing credit card debt.
Even with the market frictions, the study found that the largest group of recent buyers was the Millennials, sometimes called Generation Y or Generation Next, those born between 1980 and 1995, who comprised 31 percent of recent purchases; followed closely by Generation X , those born between 1965 and 1979, at 30 percent.
Percentages of recent home purchases among earlier generations was notably lower; 16 percent were Younger Boomers, those born between 1955 and 1964; 14 percent were Older Boomers, born between 1946 and 1954; and 9 percent were from the Silent Generation, those born between 1925 and 1945.
The median age of Millennial home buyers was 29, their median income was $73,600 and they typically bought an 1,800-square foot home costing $180,000. The typical Gen X buyer was 40 years old, had a median income of $98,200, and purchased a 2,130-square foot home costing $250,000.
Fourteen percent of all home purchases were by a multi-generational household, consisting of adult siblings, adult children, parents and/or grandparents. These households were largely concentrated among middle age buyers, with 22 percent of Younger Boomers identified as a multi-generational household.
The biggest reasons for a multi-generational purchase were adult children moving back home and cost savings, each cited by 24 percent of all multi-generational households. Those were followed by health or caretaking of aging parents, 20 percent, and spending more time with aging parents, 11 percent.
The prior living arrangement of recent buyers varied by generation. Among Millennials, 62 percent rented an apartment or house and 20 percent lived with their parents, relatives or friends. Younger Boomers and earlier generations mostly owned their previous residence, with older buyers much more likely to have been homeowners.
The reason for buying a home also varied across generations: the Millennial through the Younger Boomers most often cited the desire to own a home of their own, while Older Boomers cited retirement and the Silent Generation most often wanted to be closer to family and friends.
The study found that 79 percent of Older Boomers purchased an existing home, compared with 87 percent of Millennials.
Although most purchases by all generations were in a suburban area, Millennials were more likely to buy in an urban or central city area, 19 percent, compared with only 12 percent of Older Boomers. The Silent Generation was more likely to buy in a small town, 24 percent; they also were more likely to purchase in senior related housing, cited by 26 percent of older respondents.
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