We’ve all seen the headlines. Millennial buyers are being squeezed out of the market as prices continue to climb.
While the recent data showing consistent price gains supports that thesis thus far, experts believe it also gives way to a potential opportunity for buyers who currently make up the largest cohort in the market, according to reports from the National Association of REALTORS®.
“For millennials and other first-time buyers, today’s markets are signaling a return toward seasonal trends, as improvements in the number of available homes for sale are tamping down the unsustainable price trajectory of the last 12 months,” said George Ratiu, manager of economic research at realtor.com®, in a recent statement.
Ratiu was responding to recent reports that showed a rebound of pending home sales after a two-month slump.
He also noted that the price gains are likely cooling down along with the heated competition for listings as the market settles, providing better buying opportunities for folks still in the market.
While affordability still presents challenges to buyers nationwide, real estate professionals aren’t counting younger consumers out of the market just yet.
Guiding Younger Buyers
Agents and brokers say they are trying anything they can to help their millennial clients seize their share of the American Dream, including sweetening their offers to sellers.
“With first-time buyers, we were having a little bit of a harder time being competitive because of all of the cash that was coming in and the attractive offers to those sellers,” says Yuri Blanco, broker/owner of RE/MAX Executives in Boise, Idaho. “We were looking at increasing earnest money deposits, and that was rough because a lot of them are first-time buyers, so they are just starting.”
To help younger clients stand out, Blanco notes that she and her agents have had to restructure their offer packages, waiving contingencies, inspections and appraisals in some cases to stay competitive.
According to Lynn Chute, vice president of HomeSmart Realty’s office in Denver, Colorado, that was also the case in her market.
According to Chute, nearly 60% of buyers in the Denver area in the past year were millennials, including her daughter, whom she helped buy her first home.
“We had to get creative with finding ways of making their offer stand out,” Chute says, adding that she put a seller home warranty on the property at the time of contract to protect the seller if anything happened between contract and close.
According to Chute, managing expectations was also paramount to navigating first-time and younger buyers in the market.
“Everything goes back to communication,” Chute says, adding that she made sure her daughter had a good understanding of what was going on in the market and the potential challenges.
“Talking them through that and helping them understand that this is their first home and not their forever home ,” she says.
Nina Hollander, a broker at Coldwell Banker Realty in Charlotte, North Carolina, echoed similar sentiments.
“Everybody starts probably thinking they’ll get more for their money than they actually will,” Hollander says, adding that many want turnkey homes, putting them in competition with other buyers who have more money to leverage in the market.
With millennials accounting for roughly 20% of her clientele, Hollander says that showing younger buyers what they will be able to afford in a specific market can help mitigate unrealistic expectations that they may have.
“You just have to be prepared to spend a lot of time,” Hollander says, adding that, in many cases, she will call listing agents to gauge if her buyer’s budget would be competitive for the home projected to have multiple offers.
Depending on the listing agent’s response, Hollander says she will make an offer or bypass the listing, so they don’t waste time.
Compromise and Concessions
A robust urban environment is still appealing to younger and older millennials, but helping clients find more affordable options outside of the city limits breed success on the house-hunting front, according to real estate agents in Phoenix and Seattle—two markets that have led the nation in price gains for the past 25 months.
“More of them are going to have to compromise on what they want, and they are going to have to lower their expectations or drive a little bit further,” says Jennifer Wehner, CEO of the Wehner Group with eXp Realty in Arizona.
Wehner says persisting price surges coupled with lagging inventory and new construction are straining the Phoenix market, which has been a hot spot for buyers fleeing pricier coastal cities.
Based on recent reports, Phoenix recorded a 32.4% increase in prices in July from the year before.
Despite the increased expense, Wehner notes that buyers can still find affordable options if they are willing to taper their expectations and demands or travel to neighboring markets near the metro area.
“Every neighborhood is different,” says Wehner. “Right now, if I were an investor or a buyer, I’d go to Peoria or other markets. It may seem out of the way right now, but you can still find affordable housing.”
Not every millennial buyer is strapped for cash, however.
According to Seattle-based broker Shonna Peterson at the Warmack Group with Keller Willams, the Pacific Northwest city has attracted a mix of younger and older millennials—25 to 40 years old—despite its pricier housing options.
Contrary to perceptions surrounding younger buyers entering the market, Peterson notes that many of her millennial clients enter the market prepared to compete, coming to the table with 20% down in many cases.
“Most of our buyers are pretty savvy about what they are coming into,” Peterson says, adding that the several millennial buyers she encounters are well aware of how expensive Seattle is.
With a bustling tech and start-up sector, Peterson has seen a trend of workers migrating into Seattle for high-paying jobs that help counter the record high price tags for homes.
“The millennial buyer is very data-driven and has had quite an opportunity to observe the market and in one like ours specifically,” Peterson says, adding that, in many cases, if they’ve decided to move there, “they are well qualified to participate in our market.”
Rather than underestimating buyers in the demographic for its perceived inexperience, Peterson encourages agents to improve their understanding of millennials in the market.
“You have to be prepared to correspond with your client base in the way that they prefer, and so I think my No.1 piece of advice for any agent is to make sure that they understand the way that their client wants to be communicated with because that varies throughout the generations,” Peterson says.
Jordan Grice is RISMedia’s associate content editor. Email him your real estate news to firstname.lastname@example.org.