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Buying a Home

The Most Popular Cities Millennial Homebuyers Are Investing In 

LendingTree recently compiled data on millennial real estate transactions to determine the most popular cities that the largest group of homebuyers in the US is currently looking to invest in. The survey looked at 50 of the largest metropolitans throughout the US to see which ones were more saturated with millennial buyers. 

LendingTree’s Chief Economist and Vice President Tendayi Kapfidze helped lead the study, and claimed that the goal was to figure out the most popular cities that this generation were gravitating towards, as their real estate transactions within the next year could very well help stimulate local economies which would benefit the entire nation as well. Beyond the most popular, the survey also determined the least popular cities as well as where the youngest individuals in the millennial generation were gravitating towards. 

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“We found that some of the more popular cities in the US were most attractive to older millennials with high-paying jobs in the tech industry.” 

Two of the most popular cities being San Jose and Boston, which are also some of the country’s most expensive, hence why these millennial residents all have high-paying jobs in the tech industry. Millennial’s living in San Jose, which ranked as the number one city being invested in, had the highest down payments within the last year, peaking at $158,040. 

According to Kapfidze, “those borrowers had the highest average requested loan amount of $704,318. The current home value in the San Jose metro is $1,275,627.” Boston is also a giant tech hub for the older millennial generation, especially for those who went to school in the Boston area and were able to get an occupation right after graduation. 

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Ranking at number two the typical home in Boston currently lists for above $1 million, but “tech companies attract younger and wealthier workers that can afford these expensive cities,” Kapfidze explained. 

Denver, Colorado came in at number three on the list of most popular metropolitans, as this market is much cheaper when compared to the top two cities. LendingTree’s data shows that the average loan requested from Millennial homebuyers in Denver is $345,433, and the average home value in the city is $474,618. 

Contrary to popular belief, cities with a warmer climate, such as Las Vegas, Tampa, or Phoenix, actually rank lowest on the list of popular cities for millennial homebuyers. The home values in these areas have subsequently risen due to the lack of action within the past year while the prices continue to drop. 

“With Millennials as the largest home buying segment, our mid-December data isn’t showing people fleeing those urban cores,” Kapfidze explained, adding that after a year of individuals fleeing to the suburbs to wait out the pandemic, major metropolitans in the US are about to see a major influx in young buyers, which will thus help the economy in America recover as well.

Millennials Buying Home

Why Millennials Are Buying Fewer Homes

Millennials are currently the largest group of consumers in the US, and as such have a significant impact on businesses and the economy, an impact which is sure to grow stronger with time. As such, millennials are the frequent subject of speculation about their lifestyles and spending habits, and much has been made online of their supposed “killing” of various industries. Various stereotypes of millennials abound; they are thought of as having short attention spans and problems committing to jobs, but are also recognized for their desire to feel a sense of purpose and community in their professional lives. Whether or not millennials differ fundamentally from other generations when they were the same age remains an open question, but as the spending habits of young people influence various industries, businesses will have to adapt in order to meet the demands of their newest generation of customers.

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One such industry is real estate. For various reasons, millennials seem less likely than their parents’ generation to want to invest in purchasing a home—according to a ValueInsured Modern Homebuyer Survey, only 48% of millennials think that buying a home is a good investment. This is a sharp decline from two years prior, when 77% of the same generation believed in the value of purchasing a home. Many explanations have been proposed for the downward trend in millennials’ view of the value of real estate, but one popular theory is that millennials are a generation that values experiences over products, preferring to spend money on ephemeral things rather than physical objects. This theory has gained significant traction among people who seek to understand changes in young people’s spending habits, particularly when it comes to their reluctance to make expensive, permanent purchases like real estate.

When millennials are asked about their views on homeownership, however, the answers they give tend to refute this belief.

However, other theories have been proposed that have less to do with the unique characteristics of the millennial generation and more to do with external pressures. The previously mentioned survey offers different explanations for millennials’ reluctance to invest in homeownership. For instance, 49% of first-time homebuyers are concerned that rising mortgage rates could cause homes that are affordable now to become unaffordable in the future. Other economic anxieties factor into this reluctance to buy houses; 67% of first-time buyers worry that they will be unable to save enough money to buy a house they actually want to live in, and 52% believe that a home they buy now is likely to drop in value within a year. Additionally, 68% worry about the threat of another housing crisis, and 64% worry that they’ll suffer from buyer’s remorse after purchasing a home.

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Despite the reality of these widespread economic anxieties, however, many believe that millennials simply choose not to buy houses because they prioritize investing in experiences. When millennials are asked about their views on homeownership, however, the answers they give tend to refute this belief. One of the factors that delays homeownership for the millennial generation is the burden of financial obligations like student debt, which has exploded in recent years, and the slow rate of wage growth over the past several years. However, research has shown that when these financial burdens are lifted, such as when a person finishes paying off their student loans or gets a higher-paying job, rates of homeownership among millennials increase dramatically. That being said, even when the financial burdens faced by millennials are taken out of the equation, many millennials still can’t afford to buy a house. This is because the price of housing has also increased. And while a handful of millennials have taken to a “digital nomad” lifestyle, living in a mobile home and working remotely, this trend appeals to only a small number of people, as such a lifestyle can become immensely difficult both for social and practical reasons. In fact, this trend is likely driven not by millennials’ unique interest in experiences over things, but rather by financial difficulties, as the lifestyle of a “digital nomad” is one of the more affordable ways to live. Nevertheless, the myth that millennials’ spending habits are driven by preferences for experiences rather than financial difficulties persists, and continues to serve as a justification for blaming this generation for killing any number of industries.

Real Estate

When It Comes To Real Estate, Bigger Isn’t Always Better

When it comes to selling, most real estate agents will tell you that bigger…isn’t always better. Studies show that larger mansion type homes spend way more time on the market, and therefore end up selling for way less than what the seller originally asks for. Even buyers who are financially well-off, and have access to a slew of resources to fix any home the way they want it, that type of client is looking for a home that seems the most move in ready for their personal wants and needs. Just because a home is large, doesn’t mean it’s of the buyers standards. In real estate, it truly is “quality over quantity.”

“Just by adding square footage doesn’t mean that it contributes proportionally to value. For example a 30,000-square-foot mansion built in an area where the typical home is more like 10,000 square feet doesn’t mean that the value is going to be triple its neighbors. It would likely be worth more, but not proportionally,” said Jonathan Miller, a New York-based real estate appraiser to Mansion Global Magazine

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Miller went on to discuss how the largest home in any given neighborhood is often the least desirable. Maintenance of the homes is always harder, even if you have the financial means to hire an entire staff, many buyers don’t like the idea of having a bunch of different strangers in their homes every week doing different things. You don’t always know who is meant to perform what job because it often can be someone new every time, leaving homeowners to feel vulnerable in their own home. 

According to Miller the modern day buyer is looking for the details in a home that make it unique. Buyers crave their home to have something no other home has, whether that be a killer view, a specific architectural design, smart accessories, etc. all of those elements are worth more than the square footage of a home. 

Larger homes also have a major issue when it comes to selling. More often than not homes with a large amount of square footing go through multiple price cuts before actually selling, at that point though sellers will gain less from their investments. Buyers will often look at large mega mansion type homes and see it as more of an office building to maintain than the place they want to live full time. What ends up convincing them that these large properties can be their home is that large price cut. 

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Additionally, younger millionaires that are now in the market for their homes are maintaining the quality over quantity mentality, and are looking for homes that have the best functionality over size. 

“Millennials who buy houses between $2 million and $4 million want functionality. It’s very rare that you see them buying mansions where you have to take care of huge lawns and enormous houses. They want simple, they want smaller square footage and they’re thinking about how the floor plan flows. It’s going to make these megamansions obsolete,” said Alexandra Sierra of Compass Florida Realty.

However, the real estate industry is seeing a huge increase in millennials attempting to make it as an agent. One of the major reasons for this is the type of market that we’re dealing with now when it comes to selling homes. The entire marketplace is digitized, a world millennials are experts in. Additionally, this generation knows the best way to communicate amongst each other, so when agencies are faced with these younger millionares who are making their money through posts on the internet and brand deal vacations, they know the exact type of agent that can be used to speak that language.

Generally speaking, however, more real estate agents are looking to break away from working with architects who continue to work on “mega-mansion” type projects because of the decreasing relevance they bring to the market.

Selfie

Vienna Opens “Made For Instagram” Selfie Museum

Museums have been a hub of culture ever since world history originated. They give us a special insight into certain aspects of the past, humanity, and events that shape different areas of the world. The MET in New York City is the home to thousands of years worth of art and architecture from all across the globe, while the more specific Museum of Modern Art showcases one era of artistic expression and its evolution throughout time. 

Throughout the past decade museums have seen a decline in foot traffic. This is partially due to the fact that the “museum experience” has turned into more of a social affair than a cultural one. Most people go to museums just to say that they did and so they can post pictures of themselves next to trendy or interesting artifacts/art. In a study done by Artsy Online Magazine, it was found that 37% of individuals who go to museums don’t view it as a “cultural experience”. Younger generations have redefined their meaning of culture to become a part of everyday life. Street and performance art, food and drink experiences, any going out activity that humans take part in, that’s what is becoming the growing definition of modern culture. Although culture as a word is getting a bit of a face-lift, it doesn’t discount the years and years of valuable pieces that are displayed in the museums of the world and their impact on history. 

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This new market for culture has sparked a new type of museum experience to grow throughout the world. Today, it’s all about impact, and the best way to make an impact is to go viral online, so more museums that contain trendy, modern, and visually stimulating exhibits are beginning to appear. The Museum of Sex in New York City has hundreds of displays of Victorian sex toys, interactive sensory experiences, and even a bouncy house room full of inflatable breasts that you and a friend can bounce on and post online. The Museum of Ice Cream originated in San Francisco and is known for its vastly colorful and interactive exhibits, all topped off with a pool of sprinkles. Are you sensing a pattern? The main idea behind museums such as these is to be the most social media friendly. What’s more Instagram worthy than a picture of you in your sweetest outfit (pun intended) chilling in a pool full of rainbow sprinkles? 

These museums appeal to a younger audience, and therefore become trends on social media, and the business just booms. The Museum of Ice Cream as a business is now worth over $200 million, according to The Wall Street Journal. Vienna has taken all of this into account and has opened a new museum that was created with the sole purpose of being Instagrammed. So much so that the name of the museum is the “nofilter_museum”, meant to resemble an Instagram username. 

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According to BBC News, the museum is built with 24 interactive rooms all equipped with multiple backgrounds and exhibits perfect for anyone’s Instagram feed. The official website adds that “there are also ball pits, floral walls and glitter confetti, designed for creative selfies. There is even a room filled with fake food such as cupcakes and macaroons.” The museum has already sparked the interests of many online influencers who want to go to the museum for their next viral post. A museum built around the idea that it’s basically just one giant backdrop for photographs, is the new wave of business geared towards an influencer market. BBC projects the museum will get anywhere from 300-500 visitors a day. 

“I think it’s the future of museums, the main point is that it’s not only about selfies, but also about having a good time, being able to interact while experiencing art. I do think that people spend a lot of time on their phones and that’s why we try to combine that with something real and something fun. But I don’t think it is our responsibility to educate them,” says Petra Scharinger, co-creator of nofilter_museum to BBC.

Targeting that specific market is one of the smartest business decisions any company can make in 2019. Influencers get business based on the fact that their social media accounts have hundreds of thousands of followers. Those followers are basically an audience and their posts act as the entertainment, advertisements included. Companies contact these individuals to show off their product on their feed to reach that large following. Museums have seen this and want the same level of advertising. Thus, the Instagram museum was born.

Real Estate

How the Real Estate Landscape Will Change in 2020

A widely anticipated industry report, entitled Emerging Trends in Real Estate 2020, was just released by the Urban Land Institute and Pwc. According to the report, while real estate economists’ views on economic growth in the US are moderate, the real estate market should remain steady through 2021. The conclusions of the report are based on a survey conducted in August of 41 economists and analysts at 32 leading real estate organizations, who, despite warning signs of an impending recession and an escalation of the U.S.-China trade war, were generally optimistic about the future of real estate.

That being said, the report stresses the importance of adaptability to change and discipline as necessary factors for the industry to be able to remain strong in the face of a possible economic downturn and potential decreases in real estate demand over the next few years. Although blame for the last major recession was placed in part on the real estate industry for reckless lending practices and fraudulent activity, the report suggests that a future recession wouldn’t be the fault of the real estate industry. Over the past ten years the property sector has become disciplined, the report says, and any warning signs about an economic dip relate to factors that the real estate industry does not control.

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According to the report, a dynamic perspective on real estate and a rethinking of growth strategies are necessary for the real estate industry to thrive, and real estate prospects are highest in the cities of Austin, Raleigh, Nashville, and Boston. As housing needs for Millennials and Baby Boomers continue to change, multifamily and single-family housing will be in increased demand, and office spaces, hotels, and retail locations are likely to see a decline.

The report also observes the effects of the housing affordability crisis, which has the most impact in cities where the cost of living is high, including Washington, D.C., Boston, Los Angeles, San Francisco, and San Jose. Affordability is a problem not only for low-income households, but for the middle class as well, a section of the population which is rapidly shrinking as greater numbers of people fall into economic uncertainty. The effects of this crisis mean that multi-family households and co-habitation arrangements are likely to increase in popularity, changing the market somewhat.

Additionally, the report talks about the effects of climate change on real estate, and specifically points to the impact of extreme heat in urban areas. Rises in temperatures mean that cooling apartment buildings will become more expensive, and the threat of wildfires, droughts, and air pollution pose economic problems. Climate change is not the only cause of rises in extreme heat, the report claims, as increased urban development also contributes to the problem. For handling the problem, the report recommends the use of light-colored building materials and smart use of direct cooling from shade.

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As a result of difficulties with affordability, co-living is on the rise, not only for younger generations but for older ones as well. Though the trend is caused in large part by worsening economic conditions for most people, the report highlights the social benefits of co-living, which helps to create a sense of community among people, particularly in an age where technology has the power to make people feel more isolated.

The report claims the lifestyle enjoyed by young people in cities is spreading to suburban areas, which increasingly feature nightlife opportunities, and incorporate transit access, walkability, and abundant options for retail, restaurants, and recreations. As Baby Boomers are expected to live longer and stay more active than previous generations have, the implications for housing are positive. And as communities increasingly recognize the threat posed by environmental damage, they are developing a commitment to environmental and social principles including sustainable engineering and design and socially conscious business practices. 

As the federal government fails to update the country’s infrastructure, some individual states have announced a commitment to doing so instead, making them a more attractive opportunity for the real estate industry and laying the foundation for economic growth. Finally, the report finds that technology is having a strong impact throughout all types of property, as consumers increasingly demand technological solutions for productivity and efficiency.

Millennials Buying Home

Millennials Face Difficulties Affording Homes

For many Americans, a key part of the American Dream is the ability to save enough money to afford a home. But for millennials, many of whom are currently at a point in their lives where they’d like to move out of their parents’ house or their apartment and own a piece of real estate, a number of factors can make this dream seem to be an impossibility. According to the Urban Institute, just 37% of millennials owned homes in 2015, down eight percentage points from Gen Xers and Baby Boomers when they were a similar age. If millennials owned homes at the same rate as previous generations, there would be around 3.4 million more homeowners today. And although 9 out of 10 millennial renters would like to purchase a home, only 4.9 percent say they plan to do so in the next year, and 34 percent anticipate waiting five years or more before being able to buy real estate. Among millennials who want to own a home but are unable to do so, 3 out of 4 cite affordability as the reason, with many citing a lack of savings for a down payment and the burden of student loans as contributing factors.

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The causes for millennials’ problems affording homes are multifaceted. Whereas many Baby Boomers were able to attend public colleges and universities without having to pay for tuition, most Millennials did not have the same luxury, instead having to borrow tremendous amounts of money to pay for educational costs which, despite offering a value which has remained stagnant over the past several decades, have grown substantially faster than the rate of inflation. Because a higher percentage of millennials attended university than previous generations, the value of a college degree has diminished, as employers have a wide variety of choices for hiring well-educated candidates. And while millennials’ paychecks have roughly the same purchasing power as those of Americans living 40 years ago, the average cost of housing has more than doubled in that time. It has been estimated that, at the current rate, it will take the majority of millennials twenty years to save enough money for a down payment.

The financial burdens imposed on millennials dreaming of owning a home extend beyond stagnant wages and student loan debt. The cost of renting an apartment is substantially greater than it used to be, and because of the generation’s difficulty earning money, financial institutions are more reluctant to grant credit to millennials, with 58 percent of millennials being denied credit, compared to 35 percent of prior generations. Millennials are also less likely to own stocks than other generations were, as a result of having come of age during the Great Recession and becoming skeptical of the stock market as a result, causing many millennials to miss out on some of the major benefits of the recent economic boom. As a result of these economic problems, some forecasters predict that real estate agents will have difficulty selling houses in the future, as millennials replace Baby Boomers as the country’s largest generation.

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Other factors discouraging millennials from homeownership are also at play. Millennials are the most racially diverse of any current American generation, and homeownership is more valued culturally among caucasians. Additionally, millennials are waiting longer than their parents and grandparents to get married and have children, as the marriage rate among young people has dropped from 52 percent in 1990 to 39 percent in 2015, delaying the urgency of owning a home. Also, millennials tend to prefer to live in cities more so than prior generations, where the cost of living is higher and purchasing a house is out of the question. As a result of economic changes over the past several decades, the demographic among millennials most likely to own a home are those who can earn more due to having a college education and come from a wealthy background, as they can borrow money from their parents to supplement the cost of a down payment. As houses are frequently the most valuable financial assets Americans own, not owning a house has a negative impact in a person’s overall ability to accumulate wealth over time. Additionally, intergenerational transfer of homes is likely to increase wealth disparity between races of millennials, as minorities are less likely to own and be able to inherit homes.

Though these prospects seem grim, a number of solutions have been proposed to help with the problem of home affordability among the younger generation. One proposed solution is to invest in programs teaching young people about the finances of homeownership, encouraging people to start saving up for a home from a younger age and increasing awareness of programs designed to help people afford homes. Another proposal is to update the criteria that creditors use to evaluate millennials’ suitability for loans, taking into account their rental, telecom, and utility payments. In any case, whether you’re interested in buying a home soon or not, it’s always a good idea to make sure you’re keeping good track of your finances and have a smart, realistic plan for your future.

 

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