Why are Millennials Buying Small Houses?
After the second world war, baby boomers flooded the housing market buying up the biggest homes they could finance, often then rushing to start families. Two generations later however, millennials are doing almost the complete opposite. Many have bemoaned the low rate that millennials are buying homes at, opting to wait till later in life. The same is true for starting families. Many nowadays are waiting until they’re further along in their career to start families, lessening the need to buy houses. When they do finally buy homes, the new trend is to buy small.
Efficiency homes and options like ADUs are becoming more and more popular, especially as millennials are moving away from the city. So why are millennials buying such small houses? The answer is two-fold. The main reason is money. Millennials are vastly underpaid compared to previous generations and many simply cannot afford to splurge on a house like baby boomers did.
The new generation today faces economic circumstances much different from previous generations and that is affecting their real estate trends. From the Great Recession of 2008 to the student debt crisis, many today don’t have the money to buy a house. Since larger homes tend to be on the pricier end of the spectrum, naturally, with smaller budgets, millennial homes tend to be smaller.
As hinted earlier, millennials are having children later in life, if at all. According to the data from the Census, the number of 30-34 years old without children at home increased by 4% from 2011 to 2015 and the ‘baby boom’ from the 50s has turned into a ‘baby bust.’ The lack of having kids greatly reduces the need for buying homes. The reality is, the younger generations want to be established in their careers before they do things like purchase homes or begin a family.
Of this recent trend, Lawrence Yun, the chief economist says, “The fact that we’re [millennials] having smaller-size families I think naturally means that the demand for smaller-size housing would get greater interest than before.”
Similarly, millennials have different priorities in what they look for in a house. In general, millennials spend much of their time working. As a result, when they aren’t working they prefer to spend their leisure time doing other activities such as biking, hiking, going to different events in the city, etc, all things that don’t require being home. Millennials tend to enjoy doing things outside of their home. The result of that is a decrease in the need for spacious homes, resulting in an increased demand for smaller houses.
Along with the economic factor, there is also the environmental factor. Millennials are also seeking out homes that are more energy efficient. With climate change being the most pressing issue facing the generation, they are very environmentally conscious. With that, many are opting for energy efficient homes outside of the city. By moving away from the city they are reducing their costs and the amount of energy they use. Things such as xeriscaping have become popular among millennials as they require less maintenance and don’t need irrigation systems like other landscaping types.
The downsizing trend is not exclusive to millennials however. Many from generation Z who are currently in college and will soon graduate are also experiencing the constraints of students loans and are buying accordingly. Parents whose children have all moved out are also picking up on the small house trend as they no longer need the space. The ‘tiny house’ trend appears to be here to stay for a while as millennials continue to fundamentally change the real estate market.