They make up the largest generation in our nation’s history – even bigger than the Baby Boomers. They are just reaching their prime home buying age. And for the most part, they’ve never owned real estate before. Watch out housing market: Here come the Millennials. And their impact on the real estate industry could be significant.
According to a couple of new studies reported this week in USA TODAY, there are about 90 million Millennials or members of Generation Y as they’re also known, and the oldest ones are hitting their early 30s now and ready to become homeowners.
This is good news of course for home builders, who are just now recovering from the recession and looking to replenish the nation’s housing stock. It’s also encouraging for existing home owners and Realtors because it brings a new generation of buyers for their listings even as baby boomers begin to retire, a period when they aren’t as likely to buy another home.
The advantage the Millennials have over older consumers is that most would be first-time buyers who don’t have to sell another home to buy one and aren’t underwater on a mortgage or facing default or foreclosure on loans.
The downside for this group is that as a demographic, the Millennials have an unemployment rate that’s higher than the national average, some are burdened by student debt and others won’t find it easy to come up with a down payment.
But in general, “this generation is coming at the right time,” said Fred Ehle, vice president of building company PulteGroup.
What are the Millennial buyers looking for in a home? According to the USA TODAY article, they’re not much different from their parents except that they’re not as impressed by luxury and they are more likely to demand technology and flexible space in their new home.
More than half the Millennials who bought Pulte homes last year cite investment and building equity as the primary reason. These young potential home buyers are realizing that given low interest rates and affordable home prices, they may end up paying less to buy than to rent – and not through money down the drain in the process.
An online survey by the home builder in January also found that efficient use of space is important to 84 percent of young adults, perhaps because they tend to work from home more than their parents. More than two-thirds want an open layout for entertaining. And 63% want outdoor space to extend living areas.
Another survey by a sister company of Coldwell Banker’s, Better Homes and Gardens, found that technology features are more important than curb appeal to most Millennials. Almost two-thirds said they would not buy a house without up-to-date tech capabilities.
While Millennials are different in some ways from their parents, they do share one thing. They’re very concerned about value and are more frugal today because they’ve now lived through a recession. To read more, here’s the USA Today article.
Below is a market-by-market report from our local offices:
North Bay – There is a ton of pent up demand. If and when the inventory appears, our Sebastopol office said agents will have tsunami of business. In Central and Southern Marin, it’s the same old story – a sea of ready, willing and able buyers competing for those few listings on the market. The result is multiple offers, all-cash offers, bidding over the asking price, few or no contingencies and almost anything else to win out in the very tight housing market. Agents are hopeful more listings come on the market as home prices keep moving higher and word gets out that this is a very strong seller’s market.
San Francisco – Our San Francisco Lombard manager says multiple offers ratified this period ranged from three to 27. One buyer won by offering a six-day close. All cash and off-market deals still common. The Market Street office manager says agents are still seeing lots of buyers with lots of cash making lots of offers on not enough listings. As in previous weeks, most properties are seeing multiple offers (anywhere from 5 to 20+). The only sellers not receiving multiple offers are those who choose to sell with pre-emptive or private offers. Many ratified offers are from all-cash buyers with very short or no contingencies. However, there are still buyers with loans winning the day if their offer price is too good to pass up. Sales activity in the Sunset area picked up a bit as listing inventory increase slightly. The market is still extremely tight as multiple offers are the norm. There has been an increase of preemptive offers and these offers are coming in at 20% to 30% over asking with no contingencies.
SF Peninsula — The incredible lack of inventory is still with us as ever-increasing pools of buyers run from one multiple offer to the next, our Burlingame manager says. There are currently just eight active listings in Millbrae, 15 in Burlingame, 40 in San Mateo, seven in Foster City and 12 in Belmont. There are 74 active and 20 pending listings in Hillsborough. The buyer activity is stronger with multiple offers at all price points. The upper end (over $5 million) is gaining strength with cash buyers showing interest and new listings coming to the market. The devil slide’s tunnel opened this week, opening the way from San Francisco through Pacifica to the coast-side communities. Market is very brisk as many buyers from the mid-Peninsula look at the values on the coast. Buyers still showing very strong confidence in the market and almost all decent homes are being snapped up, our Menlo Park manager notes. Buyers are still in intense competition for well-priced properties in Palo Alto. Our Redwood City-San Carlos office says inventory seems to be growing slowly, but there are still quite a few frustrated buyers in the $900,000 to $1,200,000 price range. There were 10 offers on a San Carlos home that showed very well listed at $1,225,000. The Woodside office is busy with lots of buyers willing to jump on high-end well-priced properties. Three offers on a $6 million dollar property – close in 3 days. When a well-priced property shows up the buyers come out.
East Bay – Our Berkeley manager reports 100-200 visitors at some open houses, steady stream at others, even if not the first open house. Buyers’ agents are encouraged to stay in touch with a property that they may have lost to another buyer. Emotional high bidders may have second thoughts after the first blush of victory and drop out , opening the door to new buyers. Our Danville manager says the sweet spot in the market is up to $800,000 – that’s where most buyers are. Still not enough inventory, but agents are reporting listings in the pipeline. It’s still hot in the Oakland market. If it is not multiple offers it is pre-emptive. When your open house does not have 70 or more groups through it seems like something is wrong. The conference rooms and manager’s office have been full each night this week with agents writing offers hoping this time it will be the winning offer. More inventory appears to be coming out, not in any great numbers but a little more at a time, several of which are REO’s. Our Walnut Creek manager reports that listing inventory is increasing slightly but not fast enough for buyers who are ready to buy. We are still seeing multiple offers in almost every price range. Rumors are that one listing in Martinez last week listed under $400,000 received 85 offers. Along with multiple offers we see prices are rising at a strong rate. Another bit of good news: indications of more new listings coming to the market.
Silicon Valley – Agents are getting frustrated writing lots of offers and getting few acceptances, our Cupertino manager says. This is a golden time for sellers. The median sold price for Los Gatos is up 26% from $950,000 to $1,200,000 over the past year. Multiple offers continue to drive the market. Our San Jose Willow Glen office said they are experiencing slight growth in inventory each week, however the faster they come on the market the faster they sell and at unprecedented price points. It is getting to be a challenge for agents to comp properties based on the rapid pace at which homes sell and at price points well above the asking price. We are seeing homes routinely go from 5-15% above list price. It’s as if agents have to chase the markets ascending price points. The challenges facing today’s agent is trying to comp a property based on sold data that is 30 -60 days old and not setting unrealistic expectations for sellers and explaining to buyers why the list price is a starting bid point that most likely is going to go well over the asking price. We continue to see most accepted offers from “strong” buyers either all cash or a large down. We are also seeing long extended rent-backs to sellers being offered by buyers at no cost to the seller, anything to win the deal.
South County – For the first time in almost a year, agents are seeing more listings coming on the market. In March the Morgan Hill office took 33 listings—substantially up from previous months. This may be a sign that Sellers are realizing that it is the time to sell in order to get “top dollar” for their homes. The increase in available listings would also suggest that fewer homes are “under water” as higher prices are increasing owner’s equity—thus allowing marginal sellers to list their homes without having to work through a Short Sale. The market remains a “sellers’ market” but most agents are optimistic that a more balanced market is imminent.
Santa Cruz County – Inventory is increasing in fits and spurts. Not enough to push inventory beyond the 3.5-4 months we currently have. Multiple offers continue in the lower price ranges with buyers bidding well over list price by sometimes as much as $100K or more. Buyers are getting agitated by the lack of inventory and bidding wars, in some cases opting to not make an offer in anticipation of being out-bid.
Monterey Peninsula – Our Monterey Peninsula agents are very busy, with lots of offers being written though many not ratified due to multiple offer situations. While our listing inventory is not as low as in many of the Bay Area offices, in the under $1 million segment in the most sought-after areas it is decreasing each day with all these buyers now ready to buy. These properties tend to go into escrow within a week or 10 days of entry to the market.