Millennial seems to be the buzz word when it comes to all things retail and investment, with this generation shaking up the rule book on how things are done. However, are Millennials' tastes really that different from past generations', or are we just framing them in a new light, because they are finally making big purchases? We look at how Millennials are buying homes, and what their priorities are when doing so, to compare them to previous generation's trends.
This graphic was created using data from the National Association of Home Builders' report on millennial home buying preferences. We separated out the data that focused on the features in a home that are most and least wanted by Millennials. We then further divided the most wanted features into desirables and essential must-haves.
Of the least wanted features, an elevator topped the list, with 47% of Millennials voting this as the least desirable item. Cork flooring in the main living spaces took second place with 33% of home buyers' votes. A wine cellar was third least important with 32% of the vote and laminate countertops got fourth place with 30% of the vote.
The remaining 6 features all massed votes between 24 and 29%, with a pet washing station at 29% laminate flooring and only having a shower in the master bath both at 27%, dual toilets in the master bath and a plant-covered roof got 26% each, and a stucco facade only got 24%.
When it came to the most in-demand features, a laundry room got top place with 86%, of which 36% said it was desirable, and 50% said it was essential. A hardwood front exterior and a patio came next, both with 81%, yet only 33% of Millennials felt a hardwood exterior was essential while 48% felt it was desirable; 34% thought a patio was essential and 47% thought it desirable. Garage storage came fourth with 80% of Millennial homebuyers choosing this as an important feature. 44% felt it was desirable and 36%, essential.
Fifth most desirable was a walk-in pantry, with 79%, of which 45% thought it was desirable and 34% essential. Exterior lighting and a ceiling fan both got 79% though a ceiling fan was considered more essential with 40% saying it was essential compared to 35% saying exterior lighting was.
The last three features all got 78% of which a double sink was considered most essential with 38% saying it was essential, table space for eating was 36% essential and a front porch only 34% essential.
How this Affects the Real Estate and Construction Market
There are two main perspectives that can be considered when linking this data to the construction and real estate markets.
Which items are preferred and which aren't.
It would seem clear that items that are preferred should get priority when either building a new home, or marketing an existing one. As always a cost benefit analysis should be carried out to ensure over capitalization is avoided.
For instance, having a laundry room topped the list of desirable features for Millennials. However, the average cost of remodelling to create a stylish, practical laundry room can reach between $6,000 and $7,000. The expected ROI in this case is relatively good with one analysis only allocating a $4,000 return, yet it doesn't fully cover costs. The addition of a patio also only offers a 55.2% ROI and smaller projects are harder to quantify in terms of the returns they offer, for instance adding a fan to a room. This provides a conundrum, as most of these features don't seem to improve the sales price significantly, however, for those that consider them essential, their absence may cost the seller the entire sale.
Instead, when these factors are already in place in a home, they can be used as selling points and highlighted as features to potential new Millennial home buyers. Which brings us to the next point.
How much has this demand changed from previous generations?
It may be interesting to note that, most of the features that make the Millennials' top ten list can be found on the top tens of Gen-Xers and baby boomers, and even seniors are only missing four of the top ten Millenials' items from their list: hardwood front exterior, walk-in pantry, front porch, and table space for eating. This suggests that most homes would have at least some of these features in place already, making sprucing them up, and highlighting them as selling points, that much easier.
A Final Thought on Millennials' Housing Trends
As seen above, it may be less favourable to adjust a new or existing build to add these features, than to simply improve what is already in place. However, even here it is important to consider how strong the demand is for each feature and what that demand has done, and will be doing, over time. Considering whether a feature has been gaining desirability or losing it, may help to adjust the potential for a return in the future. For instance, though a laundry room is the most wanted feature by Millennials, its desirability has been steadily declining over time, from 91% in 2007, down to 86% by 2018. Yet, demand for a central kitchen island, which only got 12th place on the NAHB's desirability list has been increasing. In 2007 desirability was at 59%, yet by 2018 it had climbed to 63%.
Given that Millennials have become the biggest market segment of home buyers, it is important to stay abreast of these trends and adjust both construction and sales practices to suit. However, like most trends, the key is to find the perfect balance to ensure a maximum return, while avoiding overcapitalization.