Cracking the Millennial Code: What Home Builders Need to Know About Millennials

February 20th, 2019 - Posted by valerie@resnet.us under RESNET News

By Ryan Meres, RESNET Program Director

Recent survey results show that twenty-two percent of Millennials plan to purchase a home in the next year; the highest of any generation. Although there is little consensus on exactly what the cut-off years should be for Millennials, it’s generally described as about 1981 through 1996. There are an estimated 75 million Millennials with ages of 22 to 38 and they’re expected to become the largest generation, this year, surpassing Baby Boomers. Understanding this generation can help tap into an increasingly important customer for home builders.

Characteristics of Millennials

Millennials can be a difficult generation to crack because the oldest of this generation spent most of their childhood without knowing the internet, cell phones or computers. Meanwhile, the youngest in this generation can hardly remember a pre-September 11th world or a time without computers, internet, and cell phones.

The Pew Research Center reveals some interesting statistics on how Millennials use technology, today:

  • 92 percent own smartphones,
  • 85 percent use social media,
  • 97 percent use the internet and 28 percent do so only on a smartphone

These statistics reveal how important it is for builders to reach Millennials on their own digital turf. If builders are not maximizing their use of social media and have a significant online presence, they’re missing out on potential Millennial buyers.

Are Millennials buying new homes?

Yes, they are buying new homes! According to the National Association of Realtors (NAR), Home Buyer and Seller Generational Trends Report (NAR Report) for 2018, 36 percent of homebuyers were Millennials and 11 percent of them bought new homes. Of those that bought new homes, 47 percent did so to “avoid renovations and problems”. The median sales price for homes purchased by Millennials was just $220,000, a statistic that highlights the much recent discussion about housing affordability. With a national median sales price for new homes over $300,000, builders should consider what the right price point is for Millennials in the markets where they build. The Pew Research Center found that “the median adjusted income in a household headed by a Millennial was $69,000 in 2017 and the Zillow Consumer Housing Trends Report (Zillow) found that a median household income of all buyers, last year, was $72,500.

Characteristics of Millennial home buying

Although the NAR Report says that 36 percent of homebuyers in 2018 were Millennials, the Zillow report found that nearly half of all home purchases in 2018 were by Millennials. Understanding the types of homes this generation is purchasing and the features they value can help builders better meet their needs. The NAR Report found the following characteristics of homes purchased by everyone 37 and younger, last year:

  • Median house size: 1,800 square feet,
  • Three bedrooms,
  • Two bathrooms,
  • The top two “Environmentally Friendly” features considered very or extremely important were commute costs (35%) and heating and cooling costs (30%).

Builders can’t control how far someone’s place of work is from the home they are building, but they have significant control over the heating and cooling costs. By getting a Home Energy Rating for their homes, builders have third-party verification of the energy efficiency of their home and can market that energy efficiency to Millennial buyers. In fact, Zillow found that 56 percent of all buyers say energy efficiency is extremely or very important when it comes to their home purchase.  However, Millennials don’t just care about the home you build, they also care about your business.

Millennials Care About Your Business, Not Just Your Product

Some have described this generation as the most socially and environmentally conscious ever. Insight from the Shelton Group sheds light on how this generation makes purchasing decisions. In the 2017 report Millennial Pulse, the Shelton Group survey found that: “A company’s approach to sustainability has a big impact on whether Millennials choose to purchase from that company.” The survey also found:

  • 77 percent say a company’s social and/or business practices impact their purchase decisions.
  • 70 percent say a company’s environmental practices impact their purchase decisions.
  • 81 percent research a company’s environmental or social/business practices at least occasionally.

In a 2013 survey of incoming University of Tennessee college freshmen, 76 percent said they believed climate change was real. With that finding, it shouldn’t be surprising that as more Millennials establish careers and get ready to purchase a home, they’re considering its impact on the environment.

Further findings from the Millennial Pulse survey show that “43 percent of our Millennials could name a brand they trust when it comes to their environmental and social/business practices. And when Millennials trust a brand’s practices, 90% buy from that brand and 95% recommend their products to other people.”

Millennials are a generation that doesn’t care just about the product they’re purchasing, but the company behind it. For home builders, this means being able to tell a story about your company culture and the values that make up your brand. If those values don’t include a commitment to sustainable building practices and energy efficient homes, you might be missing out on the largest generation in the home buying market.

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