Younger buyers more likely to seek townhouses, use assistance for down payments
Younger generations are often more likely to try out non-traditional methods in the housing market, according to a recent report by the real estate site Zillow. These range from interest in renting out a portion of their home to attempting to sell a residence on their own.
The Zillow Group Consumer Housing Trends Report is based on responses from 13,439 people, including approximately 3,000 home buyers, sellers, owners, and renters. Another 1,323 responses came from tenured renters, or renters who have not moved in the past 12 months.
Among all respondents who have moved recently, younger respondents were most likely to relocate because of a change in employment with an increase in pay. Getting a new pet was the second most common reason for a move as well as the most common reason among Generation X respondents.
Millennials, defined as those ages 24 to 38, made up the largest share of buyers at 42 percent. However, the median age among all buyers was older than expected at 41 years old. First-time buyers, who accounted for 46 percent of buyers polled in the report, had a median age was 34.
Zillow found that older first-time buyers were a diverse group, generally having lower median household incomes than first-time buyers under the age of 40. Some had opted to rent into middle age for lifestyle reasons, such as the flexibility offered by a rental, while others were purchasing a home after several years of saving up for a down payment.
A home purchase was not a guarantee among those who bought a residence. Forty-three percent said they considered moving to a rental property if they were unable to find a home they liked.
Single-family homes remained the most popular choice among buyers, with 81 percent wanting this type of property. However, townhomes showed an increase of popularity, with one in 10 respondents wanting to purchase one. Among millennials and Generation Z (ages 18-23), 15 percent sought a townhome.
Eighty-two percent said it was important that they find a home in a safe neighborhood. Fifty-eight percent wanted the neighborhood to be walkable.
An affordable home was the most desirable property feature, with 83 percent placing importance on this quality. Seventy-eight percent said it was important that their home have the right number of bedrooms, and 76 percent wanted a home with air conditioning.
Younger buyers were more drawn to smart home qualities as well as commute considerations. About two-thirds of millennials and Gen Z considered a reasonable commute to be an important home quality. Forty-two percent of Gen Z respondents and 37 percent of millennials considered smart home features to be important.
Just 24 percent of respondents considered a hot tub, pool, or ability to rent a portion of their home to be important. However, younger generations showed more interest in the possibility of rental income, with 35 percent of Gen Z and 36 percent of millennials saying it was important that they be able to open part of their home to tenants.
Older buyers, along with repeat buyers, were most likely to put down at least 20 percent of the purchase price as a down payment. However, millennials made up the largest share of buyers putting down 20 percent.
Thirty percent of buyers got a gift from family members or friends to help with the home purchase, while 26 percent got a loan from them. This method was more popular among younger buyers, making up an average of one-fifth of the down payment among millennials and 15 percent among Gen Xers (ages 39 to 53).
First-time buyers were more likely than repeat buyers to make sacrifices to stay within their budget. These included buying a smaller home, buying a home without the preferred finishes, or buying a home in a neighborhood that resulted in a longer commute.
Fifty-three percent of sellers in the report were listing their home for the first time. Although the median age among sellers was 48, millennials made up the largest share of sellers at 31 percent. The average seller had lived in their property for 13 years and contemplated a sale for seven months.
Seventy-nine percent of sellers made at least one improvement to the home before putting it on the market, and the average seller made 2.2 improvements. Interior painting was the most popular job, completed by 36 percent of sellers, while 29 percent landscaped their yard.
Forty-one percent said an offer fell through before they found a buyer. Among these sellers, 23 percent said the sale wasn't closed because of financing issues, while 21 percent said the buyer changed their mind. Seventeen percent were unable to complete the sale because of a contingency that the buyer first sell their own home.
Eighty-three percent of sellers made at least one concession to buyers, and 29 percent said this included lowering the asking price. Thirty-two percent included appliances with the home, while 29 percent made minor repairs or improvements.
More than half of sellers—54 percent—sold their home for lower than their list price. Sixty-one percent made at least one change to their list price before finding a buyer, with younger and first-time sellers more likely to do so.
Forty-four percent of sellers said their residence sold more quickly than expected. Twenty-nine percent said the process took longer than anticipated.
One in 10 sellers tried to sell their home on their own, and another 10 percent tried to do so before hiring a real estate agent or broker. Younger sellers were more likely to try this method, including 36 percent of millennials and 26 percent of Gen Xers.
Zillow said sellers are increasingly favoring a "do some of it yourself" method, starting some sales activities before contacting an agent. Half of all sellers made some home improvements before hiring an agent, while 39 percent came up with a potential list price and 25 percent completed a home inspection.
The median homeowner was 55 years old and had 52 percent of their wealth tied up in home equity. Sixty-four percent saw their residence as a financial investment.
Close to two-thirds of homeowners in the report—63 percent—said they have no plans to sell their home. Just 5 percent said they expect to list their home in the next 12 months.
While 36 percent of homeowners said they haven't done any renovations in the past year, the average owner completed 1.7 projects during this time. The most popular work included landscaping (28 percent), replacing or purchasing appliances (22 percent), and interior painting (21 percent).
Sixty-five percent said they plan at least one improvement in the next 12 months. Sixteen percent said their home needs serious updates, and 4 percent said it is in need of a complete overhaul.
Forty-five percent financed their home improvement projects with cash, while 22 percent dipped into their savings. Another 22 percent used a credit card which they immediately paid off.
Forty percent of homeowners refinanced their mortgage or took out a home equity line of credit, with 73 percent doing so just once. Forty-three percent said they did so to reduce their monthly mortgage payments, while 34 percent acquired money for home improvements and 19 percent shortened the length of their mortgage.
Few homeowners expressed interest in earning rental income from their home. Just 2 percent said they rent out part of their property, while 1 percent said they plan to do so in the next three years. Another 1 percent said they plan to rent their entire home in the future.
Close to half of the surveyed renters who moved within the past year—46 percent—said they considered buying a home. These respondents were most likely to say they wanted to invest in a home instead of renting, wanted a home of their own, or wanted more control over where they lived.
However, 62 percent of those who plan to move within the next year said they expect to rent their next residence as well. Thirty-four percent said they are looking to buy a home within the next year.
Rent increases often drove tenants to relocate, with 69 percent saying their decision to move was tied directly to a rent hike. The typical rent increase among those who moved in the past year was $125.
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