Nationally, about half of American homebuyers are under 36, according to the latest study on consumer trends from Zillow, putting them squarely in the Millennial camp, born from the early 1980s to the early 2000s.
Mail surveys from the National Association of Realtors indicate that first timers account for about 32 percent of all buyers, and Dallas Builders Association member builders ranked Millennials behind Generation X and Baby Boomers as their most common buyer in a recent survey.
The contrasting studies may be related to the methodology, but the Zillow study provides optimism about Millennial homebuyers.
Millennials have been slow to buy their first house—housing economists call this “delayed household formation” and cite it among Millennials as one of the biggest reasons we saw a slow housing recovery nationwide.
According to the National Association of Home Builders, 65 percent of Millennials hope to buy a single-family home. But this age cohort experienced the largest decline in homeownership rates since 2006. In fact, only 34.1 percent of Millennials own a home, down from 39 percent in the second quarter of 2010, according to the most recent U.S. Census Bureau’s Housing Vacancy Survey, which reported data from 2010 to 2016. A recent Pew Research Study further shows 32 percent of Millennials still live with their parents.
How do Millennial homebuyers fare in DFW? We’re experiencing record growth and are on track to add more than 100,000 jobs this year, causing price increases, especially for new homes. The median closing price for a new detached home in the Dallas-Fort Worth region increased 5.4 percent year-over-year to $305,637 in August, compared to the median closing price for an existing detached home, which is now $217,360.
“Market demand, increasing local regulations, and an ongoing labor shortage are all reasons why the average new home is more than $88,000 more expensive than the average existing home,” said Dallas Builders Association Executive Officer Phil Crone. “Obviously, that kind of premium is going to make it difficult for most first-time homebuyers to step into the new home market. We need to ensure our market and our industry meets the needs of Millennials as they hold the key to our region’s continued prosperity.”
Older households and younger households are competing for housing in many of the same places in North Texas. To grow business and meet housing demand from Millennial homebuyers, Jeff Meyers, president of Meyers Research, advises builders to produce more affordable housing. New homes priced between $240,000 and $320,000 and existing homes priced between $120,000 and $180,000 experienced the most closing activity in the Dallas-Fort Worth-Arlington metropolitan statistical area over the past year.
But overall, Dallas-Fort Worth home prices are hitting record highs. Prices are about 40 percent more than what they were a few years ago.
Multifamily development is strong, with evolving amenities, and there are opportunities in housing options for both groups, but is it enough?
Some single-family developers are catering to Millennials, as well. Speaking to Dallas BA members at the Dallas Builders Show on Oct. 13, Hillwood Residential President Fred Balda cited Union Park as an example. The development, which offers new homes from the mid-$250,000s to the $400,000s, features a food truck park and many other family-oriented amenities.
“The food trucks appeal to Millennials and, quite frankly, all ages,” said Balda. “It also gives us a good idea of what restaurants would fare well in the area before committing to a fixed brick and mortar location.”
But The Union is just one place. It seems North Texas is in need of more new housing in the under-$300K range—the majority of new builds are priced substantially more. That would go a long ways toward helping Millennials afford their first homes in a market that’s getting tougher for them by the season.