Generation Y, or the Millennial generation, is the largest generation ever in the United States numbering over 83 million, or a quarter of the population, in 2015 by the U.S. Census Bureau. With their money, millennials are changing the way America invests, spends, and buys.
A study from the Responsible Investment Association showed that millennials are interested in investments that provide a solution to social or economic problems. Generation Y also have a strong desire to invest in impactful and responsible assets. Although dealing with–at times–crippling debt, millennials tend to be more focused on fiscal balances and debts. According to Goldman Sachs Global Investment Researcher Lindsay Drucker Mann, while millennials do spend freely in some areas, they tend to, as a whole, be more conservative about their finances. But what do these facts mean to the real estate investing market?
RealtyShares reported that millennials are the only demographic to prefer real estate over other investment options, such as stocks and bonds. Possibly due to the market crash, millennials look at real estate as a sustainable and viable investment option. Since real estate investing provides a home to a family in need, millennials can invest while offering help to the social issue of homelessness.
Millennials often get dubbed as entitled, lazy, or avocado lovers. However, research from the National Association of Realtors may surprise those who believe the negative connotations of generation Y. The study found that millennials continue to be the largest group of homebuyers, representing 65% of all first-time homebuyers in 2017. What’s more, TD Bank reports that two-thirds of millennials are saving for a home down-payment.
Millennials (55%) are excited about opportunities within real estate investment, although 83% of the generation wish the process was easier. RealtyShares found that 54% of millennials are interested in investing in real estate outside of their primary residence, a percentage slightly higher than the 55+ demographic. The study also found that 7% of millennial renters are currently investing in real estate other than their primary residence.
Due to the preferences, experience, and knowledge of this newer and larger demographic, agents and lenders have already begun to notice a difference in Millennials’ choice of strategy and action. Rather than the more traditional approach of contacting a local real estate agent, millennials start with a web search to find different options before contacting a lender. In response to Generation Y’s tactics, real estate firms are now approaching lenders for homebuyer referrals. The impact of these preferences can already be seen with Loan Depot and Quicken Loan’s In-House Reality Service, which connects verified real estate agents to local and pre-approved homebuyers. While this strategy is aimed at technologically involved millennials, the influence will soon be seen in the investment lending market.
As millennials enter their peak spending years, their impact on real estate and other markets will be seen. Just as their parents did before them, millennials are changing industries to fit their new technologically driven world.