As U.S. Housing Market Softens, Millennials Face Greatest Hurdles
According to the 3rd annual Zillow Group Report on Consumer Housing Trends, Millennials - the largest group of home sellers - are the most likely to make concessions. They often have closing dates changed and have an offers fall through, even at a time of record high home value growth and low inventory. Early signs of a softening market, after years of sellers having overwhelming control, signal even more seller struggles into the future.
The 2018 Zillow Group Report, the largest and most comprehensive survey of real estate consumers, reveals that sellers are finding it difficult to sell their home on the timeline their life demands and examines why Millennials (those ages 24 to 38) are the least satisfied with the process.
Millennials are more likely to be experiencing major life events such as marriage, childbirth, changing jobs or relocating for work than any older generation. For 69 percent of Millennial sellers, the expense and stress of moving, making improvements or repairs to sell, selecting an agent and uprooting their family is compounded by the pressures of buying a new home at the same time.
Millennials are the quickest to decide to sell, making that decision an average of 3 months faster than older generations, Fifty-eight percent of them experience an offer fall through (compared with 41 percent of all sellers), and 89 percent make concessions to complete a deal, such as including appliances, lowering the price or paying some of the closing costs (compared with 83 percent of all sellers).
Perhaps then it's no surprise that that 86 percent of Millennial sellers say they would do at least one thing differently if they could start over (compared to 67 percent of all sellers), with 29 percent saying they would have listed their home at a different price. With so many moving parts and the potential for setbacks, many sellers say they wish they had started the process sooner.
"These seller challenges don't indicate we're suddenly in a buyers market - we don't expect market conditions to shift decidedly in favor of buyers until 2020 or later. But buyers certainly are starting to balk at the rapid rise in prices and home values are starting to grow at a less frenetic pace," said Zillow Chief Economist Dr. Svenja Gudell. "Whether this tilt in the balance is just a pause or the earliest signal of an emerging buyers market will determine the extent to which buyers and sellers and their agent-partners recalibrate their strategies to adapt. The Zillow Group Report reveals that as hectic and stressful as the process can be, most sellers still go on to buy another house, and, if past is prelude, they'll find themselves back in the market as sellers in another decade."
Inventory and affordability still top list of buyer challenges
The 2018 Zillow Group Report sheds light on how buyers, especially those doing so for the first time, approach what is likely the biggest financial investment of their lifetime.
Nearly a third of Millennial and Gen Z buyers (31 percent combined) end up living in an area they hadn't initially considered, as a result of challenges relating to affordability and inventory constraints: 37 percent combined say there aren't many homes for sale in their preferred area, while 33 percent combined are priced out.
Nearly half (42 percent) of today's buyers are between the ages of 24 to 38, and their younger cohort Generation Z, ages 18-23, already make up three percent of home buyers.
More than half of Millennial buyers (60 percent) end up putting down less than 20 percent on their purchase. These young buyers are also more likely than older generations to rely on family and friends for help cobbling together the funds to buy a home, and are the generation most likely to exceed their budget. Those who compromise to stay within their budgets are most likely to accept a home without their desired finishes, a smaller home and a longer commute.
Renters remain the most financially squeezed
The Zillow Group Report also examines the financial pressures of today's renters, who typically spend about 29 percent of their household income on rent. A recent slowdown in rent growth has eased some of the pressure, yet rent affordability is worse today than it's been historically, and makes it difficult for younger renters (half are Millennials and 15 percent belong to Generation Z) aspiring to own a home to save for a down payment.
Faced with a move, 46 percent of all renters who uprooted this year say they considered buying a home. The desire is especially noteworthy among younger generations: 52 percent of Millennials say they thought about buying a home during their last move, as did 49 percent of Generation Z.
Renters remain the most financially stressed, to the point where nearly half (48 percent) cannot cover an unexpected expense of $1,000 and two-thirds (67 percent) of all renters who moved from a previous rental home indicate that their decision to move was directly impacted by a rent increase, which typically was about $125.
The 2018 Zillow Group Report on Consumer Housing Trends is the 3rd annual largest-ever survey of U.S. home buyers, sellers, owners and renters, and asked more than 13,000 U.S. household decision makers aged 18 and older about their homes - how they search for them, pay for them, maintain and improve them, and what aspirations and challenges drive their decision.