Today, we’ll look at a few trends and issues regarding how potential home buyers can achieve homeownership. We’ll also offer ideas for how to help them address those issues as a new home builder.
Affordability Is Still a Crushing Burden
Simply put, most first-time buyers can’t afford homes. They’re just too expensive. And according to a study from Apartment List, this fact shows in the noticeable homeownership gap between millennial homeownership rates and the homeownership rates of previous generations.
That same study also found that only 15% of millennials have at least $10,000 saved for a down payment. More worryingly, a whopping 67% have no down payment savings at all.
In fact, more millennials have begun to give up on the idea of homeownership entirely. From 2018 through 2022, the share of millennials who said they’d always rent rose from 13.3% to 24.7%. Nearly a quarter of millennials, who comprise the largest potential share of home buyers on the current market, don’t think they’ll ever own a home.
And things aren’t getting better for millennial and Gen Z buyers. In at the end of 2023, the median home price was $417,700. Compare that to 2020, when the median price was $329,000.
How Builders Can Address Affordability
There’s no silver bullet for builders to address the affordability crisis. However, if there are any silver linings, it might be the advent of working remotely becoming more normalized, and increasing desire among millennials for lower-density living.
When combined, these two factors may entice millennials to look more seriously at suburban housing, which often provides more living and working space within the home. Millennial buyers have been trending toward suburban living as they’ve aged and begun growing their families. With more opportunities to work from home, you might be able to attract qualified buyers who feel less tethered to living in urban areas.
Additionally, the build-to-rent market may provide new opportunities for builders as well.
Historic Inventory Shortages
On both the new home and resale sides, housing inventory is at historic lows. Between high prices for building materials and labor, along with the previously mentioned affordability crisis millennials experience, millennials face unprecedented obstacles to homeownership.
Anecdotally, millennials are challenged by the fact that cash-paying investors often outbid them on resale homes. As mentioned, most millennials have no money saved for a down payment. This keeps a huge portion of them out of the market.
Even more frustrating, even the 15% of millennials who have $10,000 or more saved for a down payment often can’t compete with investors who can pay well over asking price in cash. Recall that the median price of a home at the end of 2023 was $417,700. That’s over $83,000 in down payment money for a conventional loan, and it doesn’t account for high interest rates.
Between fewer options and deep-pocketed investment buyers, younger, first-time home buyers are often crowded out of the market.
How Builders Can Address Inventory Shortages
Though the inventory shortage cuts both ways, builders of new homes could have a slight advantage. Millennials are more willing to move to the suburbs and exurban areas. They like the sense of community that volume and master-planned communities offer. They also want nearby amenities like schools and restaurants. You’re likely building neighborhoods like this in areas like these.
Additionally, with the right marketing plan and communications, you may be able to tap into a market of millennials who can afford a down payment but are getting squeezed out of the larger, extremely competitive resale market.
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Buyer’s Remorse
Buyers who can afford to purchase a home often experience buyer’s remorse. Though there are several reasons why they experience buyer’s remorse, a big cause of it includes the high cost of addressing maintenance and unexpected breakdowns.
How Builders Can Address Buyer’s Remorse
In addition to building high-quality homes, you can become a 2-10 Home Buyers Warranty (2-10) New Home Warranty Program Builder Member. 2-10 Builder Members have access to the 2-10 New Home Warranty Booklet, which is a powerful tool in setting expectations and answering common workmanship questions. It also comes with an easy-to-use 2-10 New Home Maintenance Guide to give homeowners more confidence in what to expect regarding maintenance. When people know what to expect, it can help reduce their remorse.
2-10 Builder Members can also give homeowners unique access to a 2-10 Home Service Plan for new homes. With a 2-10 Home Service Plan, homeowners are plugged into the 2-10 Contractor Network, which can help them solve unexpected breakdowns to important systems and appliances. This, in turn, can improve the experience of homeownership and help minimize the likelihood of a homeowner having regrets about buying a home.
