Lingering adult children influence Gen X home buying decisions

Members of Generation X are the most likely to buy a multigenerational home, according to a recent report by the National Association of Realtors. This trend is a result of adult children in the generation who have moved back in with their parents or never struck out on their own.

While 12 percent of buyers purchased a multigenerational home between July 2017 and June 2018, the share stood at 16 percent among Gen Xers (defined as ages 39 to 53). The share was also higher among other older generations, including 15 percent of younger boomers (ages 54 to 63) and 13 percent of older boomers and the Silent Generation (ages 64 to 72 and 73 to 93, respectively).

Younger buyers were more likely to say that they purchased a multigenerational home in order to live with an aging parent and help take care of them. Thirty-one percent of younger boomers who bought a multigenerational home said adult children or relatives had moved back into the household, while 27 percent of these Gen X buyers said their adult children never left home.

"The high cost of rent and lack of affordable housing inventory is sending adult children back to their parents' homes either out of necessity or an attempt to save money," said Lawrence Yun, chief economist at the National Association of Realtors. "While these multigenerational homes may not be what a majority of Americans expect out of homeownership, this method allows younger potential buyers the opportunity to gain their financial footing and transition into homeownership. In fact, younger millennials are the most likely to move directly out of their parents' homes into homeownership, circumventing renting altogether."

The finding was part of the National Association of Realtors' 2019 Home Buyer and Seller Generational Trends study. The report is based on 7,191 responses from people who recently purchased a primary residence.

Buyer characteristics

One-third of all buyers were purchasing their first residence. Millennials made up the largest share of buyers at 37 percent, including 26 percent of older millennials (ages 29 to 38) and 11 percent of younger millennials (ages 21 to 28).

Yun said the division of the millennial generation was necessary because younger millennials have now eclipsed the Silent Generation, who accounted for just 7 percent of buyers. He also noted that younger millennials tend to purchase smaller, lower-priced homes, while the median price of a home purchased by older millennials ($274,000) is nearly $100,000 higher.

"Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this," said Yun. "Their choices are falling more in line with their Gen X and boomer counterparts."

Gen X respondents had the highest median household income at $111,100. They also bought the largest and most expensive homes at a median of 2,100 square feet and $277,800.

Sixty-three percent of buyers were married, while 18 percent were single females, 9 percent were single males, and 8 percent were unmarried couples. Younger millennials were most likely to purchase a home as part of an unmarried couple, with 20 percent describing themselves this way.

Home choices

Buyers under the age of 63 were most likely to say they wanted to buy a home of their own. Older buyers were more likely to say they wanted to be closer to friends or family, downsize to a smaller residence, or purchase a home for retirement.

Eighty-six percent of buyers bought an existing home, and were most likely to prefer the better price or value offered by these properties. Among new home buyers, younger buyers wanted to avoid renovations or repairs while boomers were more likely to want to choose or customize their home features.

The typical buyer bought a home with a median of 1,900 square feet. Younger millennials bought the smallest homes, with a median size of 1,600 square feet, while Silent Generation buyers bought homes with a median size of 1,700 square feet.

Across all generations, suburbs were the most popular neighborhood among buyers, followed by rural areas. Millennials were most likely to favor urban neighborhoods, though just 17 percent bought a home in one.

Commutes had a greater influence on younger buyers, with 71 percent of younger millennials and 61 percent of older millennials saying it was important that the neighborhood be convenient to their workplace. While heating and cooling costs were the most important environmental consideration among all buyers, younger buyers were more likely to be concerned about the distance required to drive to work.

Forty-seven percent of the Silent Generation said it was important that a neighborhood be convenient to family or friends, making this the most popular consideration for the generation. However, younger buyers were also likely to favor this quality, with 45 percent of younger millennials and 42 percent of older millennials saying it was important.

The homebuying process

All generations said they began searching for homes online as the first step of their home search. As a result of this research, 67 percent did a subsequent home walkthrough while 41 percent stopped by the property to see its exterior and the neighborhood. Younger buyers were more likely to use online services for additional steps in the homebuying process, including finding a mortgage lender, getting pre-qualified for a mortgage, and applying for a mortgage.

The typical buyer searched for 10 weeks and looked at 10 properties before finding a home to purchase. The Silent Generation completed the process faster, searching for a median of eight weeks and looking at just six residences.

Younger buyers were more likely to consider buying a foreclosure, with 42 percent of younger millennials and 38 percent of older millennials including them in their search. Buyers who considered a foreclosure but did not go with one were most likely to say they couldn't find a home that suited them or that they thought the process of buying a foreclosed home was too complex.

Eighty-eight percent of all buyers financed their home purchase, including nearly all millennials (97 percent). Fewer than two-thirds of buyers in the Silent Generation—64 percent—used financing in their purchase.

Most buyers dipped into their savings or used proceeds from the sale of their previous home to finance a down payment. Older respondents were more likely to favor the latter method, including 54 percent of older boomers and 60 percent of the Silent Generation.

Younger buyers were more likely to rely on gifts from a relative or friend. While just 12 percent of buyers used this resource overall, the share rose to 28 percent among younger millennials and 21 percent among older millennials.

Thirteen percent of all buyers said saving for the down payment was the most difficult part of the process. This was more concerning for younger buyers, with 26 percent of younger millennials and 23 percent of older millennials saying it was challenging but just 1 percent of the Silent Generation holding the same view.

Debt delayed buyers for a median of three years. The typical delay was five years for Gen Xers and younger boomers, but just two years for younger millennials.

Younger buyers were more likely to be delayed by student loans, with 42 percent of younger millennials working to pay off a median debt of $30,000. Millennials were also more likely to be affected by auto loans.

"These buyers are the most likely to receive some or all of their down payment as a gift from family or friends, usually their parents," said Yun. "This could explain why their debt is not holding them back from homeownership as long as other generations, who are less likely to receive down payment assistance."

Older buyers were more likely than younger ones to say credit card debt or health care costs delayed their purchase.

Sellers

Gen Xers made up the largest share of buyers who were also selling a home, with one in four doing so. Older boomers accounted for 22 percent of this group, while younger boomers made up 21 percent.

Eighteen percent of buyers who were selling a previous residence were older millennials. About three-quarters of this group were selling a home for the first time.

Younger buyers were more likely to be selling because their previous home was too small, and older millennials and Gen Xers bought properties that were a median of 280 and 230 square feet larger than their last residence, respectively. Older generations typically downsized from larger homes to ones that were a median of between 100 and 260 square feet smaller. One in five Silent Generation sellers said they were moving because their previous home was too large.

This trend aligned with purchase prices, with older millennials and Gen Xers typically buying homes that were between $36,700 and $37,000 more expensive than their last home. Older generations bought properties with a median price $20,000 to $37,200 lower than that of the home they were selling.

Most sellers got a good price for their previous home. Among all buyers, the median sales price was 99 percent of the list price.

Younger buyers were more likely to sell above list price, with 27 percent of older millennials and 21 percent of Gen Xers doing so. Just 17 percent of boomers and 12 percent of the Silent Generation sold above list price.

Older buyers had typically lived in their home for a longer period, allowing them to benefit more from equity. The typical Silent Generation seller had been living in their previous residence for 17 years and built up 55 percent equity in their home, a median of $86,300. Among younger millennials, the median seller had been in their home for just five years and built up 20 percent equity in the property, or $40,000.

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