John Burns provides insight into millennial market trends and the factors shaping them
Builder and Developer: What effects do you think we’ve seen from millennial homebuyers entering the market so far in 2019?
John Burns: Well, I break the millennials up into the older millennials and the younger millennials. Depending on your definition, it starts with people around 1984 who are about 35 years old already. The millennials have been buying homes for a very long time, we just continue to see them continue to buy.
B&D: I’d love for you to elaborate on the two different sides of the millennial spectrum.
JB: So Mark Zuckerberg is a millennial, and most of the unicorns that have billion-dollar evaluations today were started by millennials. You have that group on one end of the spectrum, and then you have people just graduating from college on the other end.
The earliest millennials have left the nest. Those born in the 1980s have already formed 24 million households. They’re homebuyers. The only thing that’s really different than them and prior generations is that they’re walking around with a lot more student debt than prior generations. That’s causing them to live at home longer. That’s causing them to rent longer. They’re buying homes, on average, about four years later than their parents did, but they’re buying. Frankly, this has been going on for the past six or seven years at a pretty steady pace as we see it.
B&D: What challenges do you think exist for prospective millennial homebuyers who still have not switched from renting to buying?
JB: If you’re talking about California, that’s a much different story than a national story. The median home price in Orange County is almost $800,000, which is just ridiculously expensive for everybody, whether you’re a millennial or not. Obviously, somebody who is 25 is usually making less than someone who is 45, so it’s more of an issue for millennials. But in California, it’s more of the fact that they chose to live in a very expensive market.
What we’re seeing nationally is a lot of homebuying in Nashville, and in Austin, Texas, and in Dallas and Houston, where the home prices are $300,000.
B&D: What types of markets/locations do you think appeal most to millennials?
JB: What’s appealing to millennials is places where housing is affordable, and where there’s a lot of fun things to do and a lot of millennials to do it with.
We see that in Denver, Austin, Nashville…Huge in-migration markets of millennials.
B&D: What changes do you expect to see in the market in the coming months?
JB: Nothing significant. Rates are pretty steady; home prices actually aren’t appreciating much anymore. The rest of 2019 looks like it should be playing out like a typical year.
The second half of the year is always slower than the first half of the year; that’s just the way the housing market works. People with kids want to get their kids in and settled before school starts in August or September. We’re seeing a very normal back half of the year I would say, compared to the front half.
B&D: Gen-Z will be the next demographic entering the market. Do you expect similar trends that we have seen with millennials? If not, what do you expect to differentiate these groups most?
JB: Nobody defines Gen-Z as the same age, so that depends on how you would define it. I’d define it as people born in 2001; some start in 1996 or 1997, so it’s different.
But the people born in the 2000s — let me just say it that way — were really not impacted by the great recession. They were just little kids at the time. The people 10 years older than them have strong memories of what the recession did to the housing market, and have a strong fear of debt. I don’t think this Gen-Z is going to have the same fear of debt as the millennials because they were too young to remember The Great Recession.
If you look at the younger cohort of millennials, even though they have a lot of student debt and they might be borrowing money for their cars, they’re using debit cards rather than credit cards, which is a pretty disciplined behavior compared to other generations.
Even in the research we did, kids particularly in the early teens, are very impacted by what happens to their parents and their friends’ parents. I think there’s a lot of people who are in the generation graduating from college right now that are very afraid of the recession even though they were just kids at the time. It’s the next wave through that isn’t going to remember that.
B&D: What is the effect of millennials on the smart home technology market in your opinion?
Millennials expect smart home technology; most of it runs through their phone. It’s very easy to acquire smart home technology in a resale home versus a new home. Unless you get to the fancy stuff, where you can adjust the lights and the drapes go up and down, but that’s a very affluent buyer choosing that type of upgrade.
Lennar’s doing it here in Irvine and so is Brookfield, but that’s not for a first-time buyer.
B&D: Is there anything else you feel is key to mention?
JB: I think the industry makes too many generalizations about millennials, and they have to remember that some of them are 22 and others are 35, and that is a very different group.
We actually broke it down by five-year cohorts, but you could do it by 10-year cohorts. What I usually ask people when they ask me a millennial question is, “Are you talking about people in the ‘80s, or the ‘90s, or are you going into Gen-Z, which is the 2000s?”
[They had] very different experiences as kids, and that’s going to impact their purchasing behavior dramatically.