Generation Y or Gen Y, also known as the Millennial Generation, is poised to be the next big demographic to enter the housing market.
Gen Y elders are already taking the plunge.
Born between the 1980s and the early 2000s and aged 13 to 33, the older Gen Yers are coming to market just as the housing recovery gets underway and they could play a key role in helping to sustain housing through the next boom.
Unfortunately they do have some baggage that could delay the full force of their arrival to market, according to John Burns Real Estate Consulting’s “Gen Y, You’ll Have to Wait” report.
Burns Consulting says Gen Yers suffer:
Unwieldy student loan debt – Forty percent of the 18-29 year old population with established credit is saddled with student loan debt. You can’t buy a mortgage today with a high debt to income ratio.
The Great Recession – The worst economic downturn since the Great Recession will be etched in the minds of Millennials for years to come. The housing crisis arrived just as Gen Yers were finding their financial legs. Many went back to their parents’ basement, delayed the start of their careers and or spent time in the unemployment lines.
Burns says 9.7 percent of those aged 20-34 is unemployed compared to 6.2 percent among older groups.
A cultural shift – Not really baggage, but what history may reveal as personal financial and sociocultural change for the better, Gen Yers aren’t rushing to get married and raise a family.
Compared to previous generations at the same stage in life, more Gen Yers see marriage and nesting as a more distant priority.
Tech centers paint different Gen Y picture
Boots-on-the-ground in Silicon Valley say tech industry incomes may bring more Gen Yers to market sooner than Burns Consulting expects. Likewise, other areas where Gen Yers thrive, including Austin, TX and North Carolina’s Research Triangle, could also be exceptions to the norm.
Prudential Real Estate’s first quarter Consumer Outlook Survey says 77 percent of consumers feel that the real estate market and property values will recover, up four points from the previous quarter. However, among all age groups surveyed, Gen Yers and Gen Xers (pre-Gen Y generation) remain most confident that real estate and property values will recover.
The California Association of Realtors says statewide, the average Golden State home buyer is 35 years old and 22 percent of 2012 buyers were among Gen Y’s elders, aged 25-34 years old. Another 21 percent were in the 35 to 44 age group.
Carolyn Miller, president of the Silicon Valley Association of Realtors and an agent with RE/MAX Real Estate Services in Cupertino, CA, Apple’s hometown, said “CAR’s home buyer profile fits many buyers in the tech industry, which is growing by leaps and bounds in Silicon Valley.”
The profile says 99 percent of buyers have an annual household income of more than $75,000. More than 30 percent earn between $100,000 and $149,000.
Money to burn, home care time limited
That kind of income pays off student debt quickly or makes it manageable while paying rent or even with a mortgage and even in Silicon Valley. Silicon Valley Millennials know home prices are still hundreds of thousands of dollars off peak price levels achieved at the height of the boom.
While Burns Consulting says Gen Yers will gravitate toward “conventional” suburban homes because “urban housing options are often higher priced with monthly (homeowner association) fees and smaller in size,” Miller begs to differ.
Condo prices have seen bigger price increases in many Silicon Valley communities because the younger set there spends too many long hours at work or play to mow the lawn and repair the roof.
Condo homes near public transit and a vibrant nightlife takes precedence over tedious commutes and sitting in a lawn chair in the driveway.
You can’t create the next big thing if you are spending all your time organizing a two-car garage or cleaning the pool.
“Also noteworthy to mention is sales of condos are gaining ground and this seems to jibe with what young people want. Clean, compact, a place to live with less maintenance, no yard work,” said Miller.
“It’s possibly due to their busy lives where both parties work and shuttle kids to activities. Families seem to be busier outside of the home far more than previous generations. Our activities used to be centered around the home and, now it seems the home is just a base,” Miller added.
Who are these Millennials?
Mouse over and click the image below to enlarge and get a clue.