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How millennials are buying homes

Because they grew up in the age of the internet, millennials are known as the tech-savvy generation. They’re more likely to live at home for longer stretches than the generations before them. They’re also more environmentally conscious than any other age group. However, there’s a new trend for this generation of people born between 1981 and 1996. In addition to making up the biggest portion of the world population, millennials are moving out to establish their own households in record numbers, making up the largest share of first-time home purchase applications. According to the National Association of Realtors (NAR), the typical first-time homebuyer was 33 years old this year.

Read on to learn about where millennials want to live, how they use technology to benefit the homebuying process and what they should consider when buying their first home.

What percentage of millennials own a home?

Apartment List’s 2021 Millennial Homeownership Report found that 47.9% of all millennials own a home. That compares with members of Generation X with a homeownership rate of 69.1% and baby boomers at 78.8%. Millennials have been quickly catching up as their homeownership rate has increased faster than other generations.

Where are millennials buying homes?

According to CoreLogic, millennials want to live in areas that have higher salaries with high-tech job markets. Thus, they’re more likely to purchase in urban areas with high-tech job opportunities or affordability. Along with employment opportunities, lower tax rates and preference for open space are also top considerations.

Recent research identified the most popular cities in the U.S. where millennials are buying homes. Here are the top five hottest metro areas with the highest millennial home purchase applications.

  • 1. San Jose, California

    Despite its high cost of living, millennial homebuyers still favor San Jose. Considered the capital of Silicon Valley with over 6,000 technology companies and startups, Curbed San Francisco writes that high-tech jobs are the most likely explanation. Only an hour south of San Francisco, San Jose boasts art museums, amusement parks and reliable transportation. Millennials looking for open space are likely attracted to one of the nation’s largest urban trail networks paired with mild temperatures and sunny skies.

    • 25% of the population in the area are millennials
    • Median home price of over one million dollars (as of January 2022)
    • San Jose is one of Redfin’s top 10 most competitive housing markets, with most homes getting multiple offers and the majority of homes selling above list price
  • 2. Austin, Texas

    There are many good reasons why Austin is one of the fastest-growing cities for young professionals. Austin has affordable housing availability with better housing prices than many major metropolitan areas, numerous parks and trails and a growing tech hub. Not to mention it’s well known for its vibrant live music scene.

  • 3. Seattle, Washington

    The Seattle Times has branded Seattle as the “ultimate millennial city.” Seattle was the fastest-growing big city of the last decade, attracting young adults “with its thriving tech economy and easy access to gorgeous natural scenery and outdoor recreation.”

  • 4. Pittsburgh, Pennsylvania

    With more than 60 colleges and universities, Pittsburgh is a college town that has attracted more than 1,600 technology firms. Along with employment opportunities, Pittsburgh claims a vibrant art scene, numerous parks and amenities, not to mention a sports team for every kind of fan. Ranked as the third-best metro area for millennials for its median home value, median household income for persons aged 25-44 and home value to income ratio, it’s no surprise that Pittsburgh is the second most popular U.S. city where millennials are buying homes.

    • Median home price of $214,798 (as of January 2022)
    • The cost of living is 11% lower than average
  • 5. Boston, Massachusetts

    Boston is a startup technology hub, where millennials will find several smart home technology companies headquartered. The greater Boston area hosts over 100 colleges and universities. In addition, it’s a walkable city with public transit options and a range of popular professional sports teams. According to Prevu, the city of Boston also offers eco-friendly homes that millennial buyers are seeking.

Guild has branches from coast to coast, with loan officers located in the cities where millennials want to live.

Ways that millennials use technology in the homebuying process

As digital natives who grew up in the information age, millennials are known for being comfortable with technology. From searching for a home online to e-signing closing documents, it’s no surprise that they may prefer digital experiences throughout the homebuying process.

  • Searching for a home

    Online tools enable prospective homebuyers to do initial research about homes that meet their criteria. 97% of homebuyers in all generations use online tools to search for a home. That number goes up to 99% for millennials. Millennials use mobile devices in this step of the homebuying process twice as often as the silent generation. When interacting with real estate agents, millennials prefer text-based communication to schedule appointments and get answers to questions.

  • Touring available homes

    Video tours and live streams are replacing simple photo galleries. Zillow reports that more than 80% of millennials would like to view 3D virtual tours and digital floor plans when shopping for a home. In addition, nearly 60% of millennials would be at least somewhat comfortable making an offer on a home after viewing a virtual tour with no in-person walkthrough.

  • Finding a mortgage

    When it comes to finding a home loan, the younger generation also turns to the internet. Online mortgages are the new norm, “they love simple user experiences, quick digital communication and on-demand service for when they’re ready to buy,” reports Forbes.

  • Applying for a loan

    The mortgage process is moving towards a more digital experience to meet the needs of borrowers who prefer the use of technology to make the loan process more efficient. Digital mortgages include an easier process for completing a loan application, allowing borrowers to submit income and asset information electronically and eliminating the need to fax, email or deliver hard copies.

  • Signing documents from anywhere

    For millennials on the go, eClosings offer a faster closing process, making it easier to review and understand loan documents from anywhere. They also provide enhanced security protections and reduce paperwork. On most loan programs, the majority of documents can be e-signed in advance of closing, including electronic notes or eNotes.

Not only do millennials use technology in the homebuying process, but they’re also more interested in buying homes with smart home technology that allows them to lower their utility bills while reducing their carbon footprint. For example, smart thermostats that give homeowners the ability to control heating and cooling systems from a smartphone which can save on heating and cooling bills.

Millennials may want to consider the benefits of an energy-efficient mortgage. These special programs create an opportunity to bundle the usual upfront costs of certain energy-efficient upgrades or solar panels into a mortgage to spread these costs over the life of the loan. Upgrades such as adding energy-efficient appliances or installing solar panels can help reduce utility costs, which helps lower monthly expenses.

7 important things millennials should consider when buying a home

  • 1. They may be eligible for down payment assistance

    Over 60% of millennials have no savings for a down payment. That may be why 28% of younger millennials rely on gifts or loans from friends and relatives to purchase their homes. Fortunately, if they can afford monthly mortgage payments and other living expenses, there are low or no down payment mortgages available. In addition, down payment assistance (DPA) programs open the door to affordable homeownership for those who qualify. As a result, they can start the journey to homeownership without waiting to save. Some DPA programs may also offer funds to cover some closing costs. If the assistance is provided in the form of a grant, it’s often forgiven over time, so it doesn’t have to be paid back.

  • 2. Student debt won’t prevent them from getting a mortgage

    Debt-to-income (DTI) ratio is important because it reflects a borrower’s ability to manage monthly mortgage payments and repay debts. Monthly debt payments include things like auto loan payments, student loans and credit card bills. Having a DTI of 36% or less is considered ideal. However, that doesn’t mean millennials won’t qualify for a mortgage with a higher debt-to-income ratio.

  • 3. Real estate professionals do more than help millennials find a home

    Zillow reports that nearly 40% of millennials are comfortable with the idea of buying a home online. The majority would also prefer to unlock a home with their phone and tour it on their own time. But there’s a reason why all generations use real estate professionals as their top resource to buy a home. With the expertise in every stage of the buying process, real estate professionals do a lot more than schedule tours of available homes. They understand what to look for when viewing homes and neighborhoods. They can quickly identify red flags, so homebuyers can focus on writing a winning real estate offer for the right home. They also coordinate with a team of professionals such as inspectors, title companies and the loan officer. Last but not least, they negotiate the contract and terms of the sale and make a competitive offer within a homebuyer’s budget.

  • 4. Not all mortgages are the same

    Because there are hundreds of types of home loans, it’s helpful for millennials to research the different mortgage types before meeting with a lender to learn more about available loan options.

  • 5. Loan officers help navigate the mortgage process from start to finish

    A loan officer will explain financing options, help choose the right mortgage, facilitate the loan application process as well as the closing process. Millennials should look for a loan officer with experience in the type of loan they’re considering. Then ask about credit, income and down payment requirements, mortgage terms, as well as possible down payment assistance programs.

  • 6. Getting pre-approved before making an offer is essential

    It’s a homebuyer’s best interest to get pre-approved, so they can learn overall financial requirements and what monthly mortgage payment is affordable. It’s even more critical to be pre-approved before touring homes. Having a pre-approval letter assures the seller that a homebuyer is financially qualified. There is no time to waste getting pre-approval after finding the ideal home in this competitive market.

  • 7. There are free homebuying resources available

    Purchasing a home is one of the most significant financial decisions people make in a lifetime. That’s why we’ve created a first-time homebuyers loan guide. Homebuyers should start here for answers to common questions, educational advice and guidance to help complete the process of applying for a loan and buying a home.

Guild Mortgage is here to guide every generation through the homebuying journey. Connect with a loan officer.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.