Overall nationwide, an improving economy, multiple years of strong job growth and a notable increase in home values fueled a greater share of purchases from Generation X households over the past year, according to the National Association of Realtors 2017 Home Buyer and Seller Generational Trends study.
The survey also found:
• A growing number of millennials and younger boomer buyers have children who still live at home
• Student debt is common among Gen X and boomer households
• More millennials are buying outside the city
• Younger generations are more likely to use a real estate agent
The challenges faced by millennials has been widely reported, but Lawrence Yun, NAR chief economist, says little has been said about the many Generation X households who bought a first home and started a family only to be rattled by job losses, falling home values and overall economic uncertainty.
Recent Gen X buyers delayed homeownership longer than millennials because of debt. They’re the most likely generation to have sold a distressed property and the generation most likely to be locked into their current home because it was worth less than their mortgage. Gen X buyers also had the most student loan debt ($30,000).
The uptick in purchases from Gen X buyers this year (28 percent) was the highest since 2014 and up from 26 percent in 2016. Millennials were the largest group of recent buyers for the fourth consecutive year (34 percent), but their overall share was down slightly from a year ago (35 percent). Baby boomers were 30 percent of buyers, and the Silent Generation made up 8 percent.
Boomers consider adult children
This year’s survey also suggests that the soaring cost of rent in many areas is likely convincing middle-aged parents to buy a home with their young adult children in mind.
Younger boomers were the most likely to purchase a multi-generational home (20 percent; 16 percent in 2016), and the top reason for doing so was that children over 18 years old either moved back home or never left (30 percent; 27 percent in 2016).
“The job market is very healthy for young adults with a college education, but repaying student debt and dealing with ever-increasing rents on an entry-level salary are forcing many to either shack-up with several roommates or move back home,” says Yun. “This growing trend of delayed household formation is one of the main contributors to the nation’s low homeownership rate.”
Student debt not just a millennial problem
Debt, particularly from student loans, appears to be a portion of the household budget of buyers in every generation. While millennials were the most likely to have student debt (46 percent), their typical balance ($25,000) was lower than Gen X buyers ($30,000).
A combined 16 percent of younger and older boomer buyers also had student debt, with a median balance of over $10,000 for each group.
Among the share of buyers who said saving for a down-payment was the most difficult task, millennials were most likely to cite student loans (55 percent), followed by Gen X (29 percent) and younger boomers (9 percent).
“Repaying student debt also appears to be slowing some current homeowners who went to graduate school and now can no longer afford to sell and trade up because of their loans,” says Yun. “Nearly a third of homeowners in a NAR survey released last year said student debt is preventing them from selling a home to buy a new one.”
Millennials moving to suburbs
Similar to previous years, roughly two-thirds of millennial buyers are married. One aspect of their household that has changed is the number of children in them. In this year’s survey, 49 percent of millennial buyers had at least one child, which is up from 45 percent last year and 43 percent two years ago.
With more kids in tow, the need for more space at an affordable price increasingly pushes millennial buyers outside the city. Only 15 percent of millennial buyers bought in an urban area, which is down from 17 percent last year and 21 percent two years ago.
“Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment,” says Yun. “These strong feelings bode well for even greater demand in the future as more millennials settle down and begin raising families. A significant boost in new and existing inventory will go a long way to ensuring the opportunity is there for more of them to reach the market.”
Using online agents
Regardless of age, buyers and sellers continue to see real estate agents as an integral part of a real estate transaction. In this year’s survey, nearly 90 percent of respondents said they worked with a real estate agent to buy or sell a home. This kept for-sale-by-owner transactions down at its lowest share ever (8 percent).
Online and digital technology use during the home search has increased in recent years. Although millennials and Gen X buyers were most likely to go online during, they were also the most likely to buy their home using a real estate agent (92 percent and 88 percent, respectively).
On the seller side, millennials were the most likely to use an agent (90 percent), followed closely by Gen X and younger boomer sellers (each at 89 percent).