Breaking from the notion of a starter home, wealthy Millennials are going big.
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If any first-time home buyers were on the fence about taking a more traditional starter home path to homeownership in 2020, the Covid-19 pandemic brought into focus the way they viewed homes and what they really wanted for a dream home.
For Millennial home buyers, this past year’s change in the economy, employment and especially dropping interest rates offered surprises, with 47% being pleasantly surprised that they could afford a higher-priced home, according to a generational insights report by realtor.com. On the flip side, 21% were surprised that their budget was lower than they thought.
The dramatic trajectory of mortgage rates in 2020 was a significant positive contributor to housing finance.
“For first time buyers, especially, the decline in the 30-year fixed rate from 3.65% in mid-March when the pandemic hit to a record-low of 2.65% on January 7, 2021, has provided unexpected leverage,” reports realtor. com, adding: “Practically, for many buyers, lower rates allowed them to stretch their budgets and buy more expensive homes than they would have.”
Generation Y, also known as Millennials, is experiencing a massive wave of people turning 30 in the next few years. The wave started in 2020, with 4.7 million Millennials turning 30, an age when many people consider buying a home.
This wave continues in 2021, with another 4.8 million members of the Gen Y generation turning 30. The generational progression will peak in 2022, 2023, and 2024 when 4.8 million people will turn 30, each year.
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Considering that in a healthy real estate year, there are about 6 million home sales, it is easy to see what a significant tailwind this demographic wave is projected to have on housing. Millennials are already comprising a dominant share of residential real estate transactions. Within this context, first-time buyers are boosting housing in 2021 and beyond, playing an important role in real estate markets across the country.
Elymae Cedeño, an operations manager for Uber in Chicago, and her husband, Diego Casanova, principal at a management consulting firm, were able to find the right mix of features and amenities in their new home at 1400 Monroe, a seven-story boutique condominium building under construction in Chicago’s West Loop.
In October, the couple, both 30 years old, upgraded from a two-bedroom, two-bath condo to a three-bedroom unit with two and a half bathrooms in the same building for $1.085 million. They plan to use one of the bedrooms as an office.
“We’ve been renting in Chicago for a while now,” said Cedeño. “As we grew in our careers, we gained a little more stability, knowing that we were going to stay in Chicago. We decided it was time to invest in a home.”
It was typical for previous generations to have purchased homes by their mid-30s, noted David Wolf of Wolf Development Strategies, which is leading sales for 1400 Monroe. He added that Millennials are now buying their first homes, and many who fall within this age cohort are in a stage of their lives and careers where they can afford larger, more expensive homes.
The 1400 Monroe collection of 42 luxury residences is on a tree-lined street just steps from an elementary school, a park and downtown Chicago.
The residences will feature oversized loft-style windows, generous private balconies, expansive outdoor terraces for second-floor homes, a package reception system, dry cleaning drop-off and pick-up services, private deeded garage parking, individual storage lockers, a dog-washing station and cold storage for grocery delivery.
Among the many options for living in multifamily buildings, Cedeño and her husband prefer the coziness of a boutique apartment building. “We’re not interested in a huge high-rise with pools, gyms and all of those things,” said Cedeño. “We’re not the type of people that use those common areas. Having an option of an upscale building with its particular amenities was a big part of making 1400 Monroe appealing to us.”
The couple have a 4-month-old puppy, so close proximity to a dog park boosted the desirability of the location.
The trend of first-time buyers driving more of the high-end housing market is likely to continue.
“Uncommonly low interest rates, the ascent of the Millennial homeowner and the prospect of working from anywhere are converging to shape a housing market unlike any other,” said Adam Contos, CEO of RE/MAX Holdings, in a statement. “We could see mortgage rates begin to inch up soon, so now might be an ideal time for home buyers and sellers to make their move and take advantage of the favorable conditions.”