Buying Homes On Their Own Terms
They prefer short-term investment over life-long dwelling, central location over roomy floor plans, and they often choose walkability over safety.
Meet the Millennials, a generation that now makes up more than 30 percent of all first-time homebuyers, and is driving the conversation when it comes to what they want in homes and neighborhoods on all levels of the national real estate scene.
Speaking of scenes. We let Peter Grimm, long-time real estate agent in Washington, DC paint us a picture of what his Millennial clients (about 30 percent of all his clients) look for in their first home.
“They often look for a trampoline property,” Grimm says. “They want to get their foot in the door and build some equity before the market is out of reach.”
This is true for Gavin Cepelak, 34, a client of Grimm’s who in 2012 bought a single-family three-bedroom home in Kingman Park in Northeast Washington, DC – an up-and-coming neighborhood.
“I was looking for proximity to friends, the ability to take Metro to work, and (buy) something affordable,” says Cepelak, who purchased a newly renovated property for $435,000.
The house is also close to DC’s super hip H Street NE corridor, home to hundreds of non-chain businesses such as artisanal sandwich shops, yoga studios, hair braiding salons, bars, and high-end restaurants.
Timing is Everything
If he were to sell today, Cepelak thinks he might fetch as much as $589,000 – the current price of a similar home two blocks away.
“You make kind of an educated guess about the home and the area at the time,” says Cepelak of the decision to buy. “You look at what’s being built around it and the proximity to transportation and services.” (Editor’s note: Since 2012 Cepelak has purchased the property next door purely as an investment.)
Eyes on the Profit
Echoing Cepelak, Grimm says for many of his young buyers, the actual house is not what they fall in love with but rather its location and what the location has to offer.
“In Washington, DC the price of homes is mostly driven by location,” Grimm says.
This means that for his young clients who are aiming to purchase a home in the $300,000-$500,000 range, compromises have to be made in terms of size and amenities.
“Buyers tend to become less picky and are willing to make compromises if they find something that they feel will appreciate,” he says.
Another big factor that drives the decision to buy is the sky-high rents in many desirable urban locations. In Washington, DC, for example, the median one-bedroom apartment rents for $2,000/mo. In Greenwich Village (NYC) that goes up to $3,800/mo. With the majority of young renters still aspiring to homeownership, that’s money they could be setting aside for a down payment or future mortgage payment.
“That’s the thinking among many young buyers,” says Marshall Berch, a real estate agent in Atlanta. “Two thousand dollars in rent? But that’s a mortgage,” he says, giving voice to his younger clients.
He says his younger buyers are looking for homes priced around $250,000, which can buy a three-bedroom house in the popular but less established neighborhoods in east and south Atlanta.
Mortgage Before Marriage
Berch says Millennials differ from other generations in that they are willing to hold onto the property for just a few years as an investment, and many choose mortgage before marriage (cultural change).
Ways in which they seem similar to generations before them: Like Cepelak, they are willing to get a fixer-upper and often look for deals in peripheral neighborhoods that border more established areas and, before kids, choose walkability over safety.
“We all wanted to be able to walk to Starbucks, but then after kids realized we could survive without that, and that schools and safety were more important,” says Cepelak
In fact, Cepelak, who since buying his first home has gotten married and has an infant, is already thinking about possibly moving to the suburbs – where safety and education are part of the appeal.
“I bought the house when I was in a different phase of my life,” Cepelak says. A phase where the crime and the hustle and bustle of the neighborhood bothered him less. “But now we have a child,” he says.
So in the end, perhaps the Millennials are not all that different from previous generations once they become more established and have children. “We all age,” Grimm says. “We lose a little of the funkiness and prefer a nice quiet meal over a place to hang out.”