Generation Y remains generally optimistic about homeownership even as California experiences a jobless recovery and a still-weak real estate market. A report conducted by the Urban Land Institute (ULI) indicates more than 70% of those born in the ‘80s and ‘90s expect to own a home before they turn 30.
73% of Generation Y respondents at least 25 years old and 78% of those between 30 and 32 expect to own homes by 2015, 67% total. 82% of those who expect to own a home by 2015 expect to own a single family residence (SFR).
Generation Y homebuyers will tend to move closer to urban centers where entertainment, shopping and community are more accessible.
While their aspirations may be grand, the harsh reality of the financial climate may prevent Generation Y from achieving homeownership as soon as they would like. Housing prices were ranked as the most important factor in their decision to purchase housing and the current lack of job security alongside low consumer confidence are not making it easier for Generation Y to become ready, willing and able homebuyers. [For more information regarding Generation Y homeownership, see the October 2010 first tuesday article, Low household formations translate to high vacancy rates.]
first tuesday take: This young generation of budding homebuyers has a tendency to be ultra-optimistic about real estate — a trait they inherited from witnessing the experiences of their boomer parents. Gen-Yers watched their parents buy and sell for profit with great success at the height of the Millennium Boom, and are now stuck choosing between how they were raised (treating a home as an investment) and what they are seeing with their own eyes as the real estate market now lies in shambles. [For more information regarding the history of the housing market, see the October 2010 first tuesday article, Is housing a luxury or a necessity?]
Still, recent homebuyers continue to believe housing prices will rise 10% each year for the next decade, even amongst shaky price trends and high vacancy rates. Their fantasy is terribly unrealistic even in normal times, and utterly foolish thinking for the decade ahead. But we will take any buyers, regardless of their attitude about a home as a profit center. [For more information regarding current homeownership trends, see the September 2010 first tuesday article, Homeownership will not soon turn a profit.]
Now that the housing bubble of the past three decades has imploded, Generation Y will learn the hard way to purchase a home without treating it as an ATM or a fail-proof investment. They will wait longer and save for a larger downpayment before settling down – unless they buy before the current cheap Federal Reserve (Fed) money and little-to-no-downpayment conditions go away. Once they settle down, they will not have the option to sell and move, or refinance, with the same frequency as their parents. [For more information regarding Generation Y homeownership, see the October 2010 first tuesday article, The demographics forging California’s real estate market: a study of forthcoming trends and opportunities.]
Ambitious agents will study the characteristics of Gen-Yers and prepare for their business in larger cities. They will take advantage of social networking to grab the attention of these young forthcoming homeowners. Careful Generation Y buyers require more informed, well-connected real estate agents who’ve done their homework. They will force listing agents to do what they are supposed to do when marketing a property. [For more information about social networking and real estate, see the October 2010 first tuesday article, Social networking has proven valuable to agents.]
Re: “What housing crash? The American dream is alive and well with Gen Y” from Urban Land