There has been a change in the demographics of first time home buyers. They are no longer only young newlyweds, but almost 40% of new buyers are single. The age of a first time home buyer has not significantly increased in recent years. According to credit.com the average age of the first time homebuyer was 29.6 years old, 30 years ago. The average age now is 33 years old.
First time home buyers represent approximately 30-40% of all home buyers in the U.S, making it a very lucrative niche market for realtors. This may be a reason realtors look for a competitive edge by acquiring real estate designations related to first time buyers. The trend seems to be similar in the Canadian markets for millennials. Over the past year or so, we have seen numerous reports from CNBC, the Washington Post, Huffington Post and more, stating that millennials are choosing to rent for a longer period of time rather than buy.
According to CNBC, homeownership has decreased dramatically since the collapse of the market in 2008, with the biggest decrease in ownership being millennials. Their projections, taken from John Burns, a real estate consultant, predicts this trend will continue until 2025. This would make the decrease in homeownership the lowest since the mid 1950’s. Approximately ⅓ of individuals aged between 18-34 are living with their parents, in a bid to save for their own home, rather than renting a home until they can afford their first home. With markets such as Toronto, San Francisco and New York, the increase in the price of the average home has not made it any easier. It is still cheaper, however, to buy rather than rent in the example markets, by a very small margin.
Overall, however, Trulia has stated that it is still cheaper by 23% for millennials to buy a home rather than rent. The best ‘bang for your buck’ for millennials are the southern states. States like Texas, Florida, and Louisiana, according to Business Insider, attract millennial buyers because they offer prices 40% cheaper than the average.
Here are the top seven cities with the cheapest options for millennials to buy in order of price:
- Detroit, Michigan
The median home price in Detroit is $60,465, while the median monthly rent is $850. The number of millennials has actually surpassed the number of baby boomers, making Detroit a ‘paradise’ for millennials home buyers. Currently, renters make up a total of 53% in the Detroit market.
- Syracuse, New York
The median home price in Syracuse is $118,999 and a monthly median rent of $1,375, making it 44% cheaper to buy than rent. Syracuse has a younger median age, 30.3, compared to the median age in the state of New York, 38.3 years old. Only 32% of homes are rented in Syracuse, according to deptofnumber.com.
- Oklahoma City, Oklahoma
The median home price in Oklahoma is $130,095, with a rental price of $2,295. Oklahoma City has a renter’s rate of 36.7%, while the vacancy rate has steadily decreased to approximately 8%. Approximately 32.9% of the city’s population is between 20-34 years old, with a median age of 34.
- San Antonio, Texas
San Antonio has one of the nation’s highest millennial growth with a 30% increase between 2000-2013, according to forbes.com. The median home price in San Antonio is $141,907 and the average rental price is $1,295, making it 42% cheaper to rent. Currently, 24.6% of millennials live at home.
- Tampa, Florida
The Sunshine State is fifth on the list, with a median home price of $151,974 in Tampa, and a rental price of $1,300. The media age in Tampa is 35 years of age, compared to the median age of 41.8 years old for Florida. Tampa has set its eyes on attracting millennials over the years and has actually seen an increase in rental price jumping to 4%, which is double the national rate, with 37.05% being renters in 2015.
- Baton Rouge, Louisiana
Baton Rouge has a median age of 30.1 and a median home price of $154,940. It is 45% cheaper to buy in Baton Rouge, with a median monthly rent of $1,395. The rental rate was at the highest rate in 2014 at 34.42%. In 2016, the supply of homes available was 3.9 months, with the average requiring 6 months to be considered an ‘adequate inventory’, according to advocate.com
- Houston, Texas
There has been a greater number of millennials renting in Houston, Texas, with a rise of 10.9 points between 2006 – 2014, according to citylab.com. The median home price in Houston is $162,784 while the monthly rent median sits at $1,550. They are facing a higher rent tax than the national median of $1,389. Houston has 1 in 5 millennials living with their parents, while El Paso has the largest share of millennials living at home with 34%, and Omaha with the smallest share, with 11% living at home, according to Biz Journals. It is also expected that there will be a surge of millennials becoming homeowners in the near future.
In 2016, millennials have taken over the baby boomers, becoming a larger and more diverse population. There will be a great demand from millennials to find their first home, and as real estate agents, it would be strategic to focus on this market. A good way to differentiate yourself to gain a competitive advantage over other agents is by learning how to cater to millennials with training through real estate designations, focusing on first time home buyers. There are a variety of incentives and tax breaks for first time buyers in Canada and in the United States. Although not all first time buyers are millennials, they do make up the majority. The chart below shows the breakdown of first time buyers by age, with millennials making up 66% of first time buyers, according to statsita.com