The pool. The outdoor deck with a fire pit. Yup, your dream home probably has all the bells and whistles. But, if you’re a millennial, you’re willing to wait. Millennials are bypassing their dream home - - for now - - and buying starter homes they can put equity into. They know starter homes are affordable and will give them more leverage.
Here’s how millennials shop for homes and what you can learn from them. And, why it might be time to call the movers!
Why Millennials are Buying Starter Homes
Millennials have different buying goals than their predecessors (Gen-Xers, Baby Boomers). They’re not interested in buying homes from baby boomers as style preferences have shifted in the last decade. Millennials don’t want Tuscan-style architecture or crown mouldings. They want open floor plans and minimalist spaces with sleek appliances. But, because they might not be ready for their dream home, some are settling on starter homes for their first purchases.
Millennials know starter homes can help them build equity and they won’t waste money on rent. While renting allows mobility, its money wasted. And, millennials have learned a lot about debt and spending habits from their parents.
So, how do millennials shop for homes? And what can you learn from them? Actually quite a bit.
How Millennials Shop for Homes
Every generation has different buying behaviours. The same can be said for millennials. Millennials (under age 37) grew up with the internet and are knowledgeable first-time buyers.
How millennials buy homes:
- They reduce their debts: Millennials have more student loan debt than any other generation in history. But they're also taking measures to reduce that debt to become homeowners. Millennials are willing to sacrifice entertainment and other expenses to pay off student loans and other debts for homeownership. They also used credit reporting tools to improve their credit scores to off-set high amounts of student debt.
- They stay informed: They access the real estate listing information and neighbourhood reports. And, they explore renovation ideas through HGTV, the Spruce and YouTube.
- They save for their down payment: Millennials will likely put 20 percent down. Why? If they put 5-10 percent down, they’ll have to pay CMHC insurance (homebuyer insurance for lenders in case a homeowner defaults).
- They’re strategic: If millennials can't afford their dream home yet, they'll buy a starter home to build equity. They research how much house they can afford with a mortgage affordability calculator.
- They’re competitive: Millennials know the market is saturated with other millennials. And then there are empty-nesters who are downsizing. That's why millennials get pre-qualified first to let sellers know they’re ready to make an offer.
- They’re savvy: Montreal, Vancouver and Toronto can be difficult markets. Millennials consider homes outside their ideal area.
- They’re proactive: Millennials write letters to sellers outlining why they're the best potential owners. And, once their offer's approved, they have the home inspected right away (to avoid delaying the closing). Some Millennials even get the home inspection done before the offer, to reduce conditions in their offer.
- They use other people’s experience: Millennials find knowledgeable realtors. They leverage their realtor’s experience which saves time and money in their house search.
Ready to Shop for the Best Mortgage Rates?
To shop like a millennial, find a low-cost starter home to save money and build equity. Then, work with a realtor who can take the guesswork out of offers and closings. And, when you’re ready to find a mortgage loan, contact Rates.ca
With Rates.ca you can compare mortgage rates from the best financial lenders in Canada. Make informed decisions about your future home. Compare mortgage rates today!