Millennial Home Buyers Are Changing the Home-Buying Process: 39% of Millennials Are Comfortable Buying a Home Online
Millennials have made up the largest group of home buyers for a few years now, and they’ve begun to change the home-buying process.
As digital natives, millennials are more comfortable finding and buying a home online compared to older generations, and they're more interested in what influencers and celebrities have to say.
The most radical change in the home-buying process is the growth of iBuyers -- companies that provide consumers a direct, instant, cash offer to buy a home outright.
As digitally savvy millennials continue to make their imprint on the housing market and Gen Zers age toward typical home-buying years, tracking how the home-buying process is changing will be crucial.
Key findings
- Nearly 40% of millennials would be comfortable buying a home entirely online, a higher percentage than any other generation.
- Just 60% of millennials and Gen Z home buyers view living close to work as an important consideration. About a fifth have no preference between living in a big city or remote area.
- About 70% of millennials and Gen Z home buyers discussed their plans with their parents. 27% said influencers and celebrities affected their home-buying plans.
- iBuyers accounted for roughly 1% of home purchases in the second quarter of 2021. In 2018, they accounted for 0.2%.
39% percent of millennials are comfortable buying a home entirely online
When it comes to buying a home entirely online, 39% of millennials said they would be comfortable doing so, as did 36% of Gen Zers, according to a survey from Zillow.
Older generations are skeptical about buying a home online. Just 19% of Gen Xers and 7% of baby boomers reported that they would be comfortable buying a home online.
Buying a home completely online can seem daunting, but it’s a method that’s slowly catching on. That phenomenon will be explored later in this article.
| Generation | Comfortable buying a home entirely online |
|---|---|
| Total | 23% |
| Gen Z | 36% |
| Millennial | 39% |
| Gen X | 19% |
| Baby Boomers | 7% |
| Silent Generation | 7% |
60% of Gen Z and millennial homeowners found their home online
While the idea of buying a home completely online hasn’t caught on with a majority of Americans, most buyers under 56 years of age found their home online, per the National Association of Realtors.
About 60% of Gen Zers and millennials found the home they purchased online. 46% of those aged 56–65 and 40% of those aged 66–74 said they found their home online. Those older cohorts were more likely than younger generations to have found a home through a real estate agent, though they were still more likely to have found their home on the internet.
| Homebuyer age group | Found home they purchased on the internet | Found home they purchased via real estate agent |
|---|---|---|
| 22–30 | 61% | 24% |
| 31–40 | 60% | 23% |
| 41–55 | 54% | 26% |
| 56–65 | 46% | 32% |
| 66–74 | 40% | 34% |
| 75–95 | 30% | 38% |
| All | 51% | 28% |
Accordingly, the most popular first step taken in the home-buying process across all age groups was to look online for properties for sale. The older the home buyer, the more likely they were to begin the process with contacting a real estate agent, although differences between age cohorts were marginal.
Gen Zers and millennials were more likely than other cohorts to begin their home-buying process by looking for information about the process online.
| First steps taken during the home buying process | All buyers | Homebuyers ages 22–30 | Homebuyers ages 31–40 | Homebuyers ages 41–55 | Homebuyers ages 56–65 | Homebuyers ages 66–74 | Homebuyers ages 75–95 |
|---|---|---|---|---|---|---|---|
| Looked online for properties for sale | 43% | 33% | 43% | 48% | 48% | 42% | 36% |
| Contacted a real estate agent | 18% | 15% | 16% | 17% | 18% | 23% | 24% |
| Looked online for information about the home buying process | 9% | 17% | 11% | 7% | 6% | 6% | 3% |
| Contacted a bank or mortgage lender | 7% | 8% | 9% | 9% | 7% | 3% | 4% |
| Talked with a friend or relative about home buying process | 7% | 16% | 8% | 5% | 3% | 4% | 5% |
Americans find virtual tours, digital floor plans, and property and real estate agent information most useful
The majority of Americans find a variety of digital tools are useful in assisting them with home buying, according to a Zillow survey.
Almost 80% said they would like to use 3D virtual tours and digital floor plans, and three-fourths said they find email notifications from websites or apps useful. Just over two-thirds reported video tours with an agent and the ability to unlock a home with a phone and tour on their own time as useful features.
According to Zillow, younger generations were more likely to find utility in these tools than older generations.
| Digital homebuying tool | Percentage of buyers who would like to use this tool |
|---|---|
| 3D virtual tour | 79% |
| Digital floor plan | 79% |
| Email notifications | 75% |
| Video tour with an agent | 68% |
| Unlock with phone and tour on own time | 68% |
That trend is reflected in data from the National Association of Realtors, which shows fewer older Americans finding online tools like virtual tours, interactive maps, videos, virtual open houses, and virtual listing appointments to be very useful compared to younger Americans.
| Website feature desired | All buyers | Homebuyers ages 22–30 | Homebuyers ages 31–40 | Homebuyers ages 41–55 | Homebuyers ages 56–65 | Homebuyers ages 66–74 | Homebuyers ages 75–95 |
|---|---|---|---|---|---|---|---|
| Photos | 89% | 92% | 92% | 91% | 84% | 77% | 67% |
| Detailed information about properties for sale | 86% | 88% | 88% | 86% | 82% | 78% | 72% |
| Floor plans | 67% | 69% | 73% | 69% | 59% | 61% | 58% |
| Real estate agent contact information | 63% | 67% | 63% | 64% | 57% | 62% | 58% |
| Virtual tours | 58% | 60% | 63% | 61% | 52% | 47% | 43% |
| Detailed information about recently sold properties | 54% | 61% | 63% | 59% | 50% | 41% | 32% |
| Neighborhood information | 53% | 61% | 63% | 59% | 43% | 40% | 36% |
| Pending sales/contract status | 53% | 63% | 62% | 57% | 42% | 38% | 24% |
| Interactive maps | 52% | 59% | 62% | 56% | 43% | 35% | 26% |
| Videos | 47% | 55% | 55% | 52% | 39% | 36% | 25% |
| Information about upcoming open houses | 46% | 54% | 55% | 52% | 37% | 31% | 17% |
| Virtual open houses | 38% | 45% | 46% | 43% | 30% | 26% | 20% |
| Virtual listing appointment | 35% | 44% | 45% | 40% | 25% | 22% | 11% |
| Real estate news or articles | 34% | 43% | 43% | 39% | 25% | 22% | 10% |
61% of millennial and Gen Z home buyers view living close to work as a critical consideration
Deciding where to live is an important part of the home-buying process. According to a survey from Zillow, 61% of millennials and Gen Zers still see living close to work as extremely or very important, and a similar percentage find a short commute to be important as well.
That a majority of millennials and Gen Zers find it important to live close to work and have a short commute is notable given that the pandemic has accelerated the work-from-home trend and given workers from many industries new flexibility in where to live.
| Extremely or very important | Millennials and members of Gen Z |
|---|---|
| Living close to work | 61% |
| A short commute | 63% |
20% of millennial and Gen Z home buyers have no preference between big cities or remote areas
Millennials and Gen Zers are somewhat undecided on whether they would like to buy a home in a remote area or big city, with 20% having no preference between the two.
Neither remote areas or big cities were preferred by a majority of Millennials or Gen Zers. Remote areas were preferred by 44% of those generations while big cities had the support of 36%.
| Preferred area to live in | Millennials and members of Gen Z |
|---|---|
| Remote area | 44% |
| Big city | 36% |
| No preference | 20% |
27% of millennials reported that influencers or celebrities impacted their housing decisions
Just over a quarter of millennials reported that influencers or celebrities affected their housing decisions, according to a survey from Zillow.
Male millennials and Gen Zers were 11% more likely than female millennials and Gen Zers to report that influencers and celebrities inspired them to make certain housing decisions.
| Group | Influencers or celebrities have inspired me to make certain housing decisions, like buying a home |
|---|---|
| Total | 27% |
| Gen Z | 25% |
| Millennial | 27% |
| Women | 21% |
| Men | 32% |
Males assigning higher importance to influencers than females when it comes to financial decisions isn’t unique to home buying -- it extends to investing as well. Motley Fool research on millennial and Gen Z investors found that males placed slightly more importance on social media buzz and influencers than females did when determining whether to buy a stock, for example.
71% of Gen Z and millennials discussed their home-buying plans with their parents; only 16% discussed with social media followers
While in the home-buying process, 71% of millennials and Gen Zers turned to their parents for advice and 61% discussed decisions with their friends.
Despite influencers making an impact on a little bit more than a quarter of millennial and Gen Zers’ housing decisions, only 16% of those generations turned to social media to discuss the home buying process.
| Decision making process around purchasing a home | Millennials and members of Gen Z |
|---|---|
| Discussed with parents | 71% |
| Discussed with friends | 61% |
| Discussed with siblings | 50% |
| Discussed with grandparents | 29% |
| Discussed with social media followers | 16% |
64% of millennials have at least one regret about purchasing a home, with maintenance costs being the most common
Even as millennials make use of new technology in the home-buying process and have newfound freedom in where to live, 64% still have at least one regret about purchasing a home, according to a Bankrate survey.
Maintenance costs were the most cited regret among all generations, registering with 21% of millennials, 17% of Gen X, and 13% of baby boomers.
Over 10% of millennials believe that their mortgage payments or rates are too high; that they overpaid; or that their house is too big, too small, or in a bad location. Less than 5% of baby boomers registered those regrets, except for their house being too small or in an undesirable location.
| Homebuying regret | Millennials | Gen X | Baby boomers |
|---|---|---|---|
| Maintenance costs too much | 21% | 17% | 13% |
| Mortgage payment too high | 13% | 5% | 2% |
| Unhappy with mortgage rate | 12% | 7% | 4% |
| Don't think it's a good investment | 9% | 3% | 3% |
| Overpaid | 13% | 5% | 3% |
| House is too big | 14% | 6% | 3% |
| House is too small | 14% | 10% | 7% |
| Bad location | 15% | 8% | 5% |
iBuyers accounted for about 1% of home purchases in the second quarter of 2021
The rise of iBuyers -- companies that bypass real estate agents to make instant all-cash offers directly to buyers or sellers -- is an emerging trend with the potential to reshape how homes are bought and sold.
One percent of homes sold in the second quarter of 2021 were done through iBuyers, up from 0.6% in the first quarter and 0.25% in 2020.
| Year | 2018 | 2019 | 2020 | 2021Q1 | 2021Q2 |
|---|---|---|---|---|---|
| iBuyer market share | 0.20% | 0.50% | 0.25% | 0.60% | 1% |
iBuyers -- short for "instant buyers" -- generally use cash to purchase a home as-is, sight unseen, without a real estate agent or broker involved. This helps to cut out fees like closing costs and commissions. iBuyers use algorithms to determine their offers.
Some iBuyers can make an offer to buy a home within 24 hours and close in 14 days. By comparison, it took up to 70 days on average to sell a house in 2020, according to Zillow. By selling to an iBuyer, however, homeowners trade finding the best offer on the market for speed and convenience.
Selling to an iBuyer also comes with service fees, which for some companies can reach 5%. The average real estate agent commission is 5% to 6%.
Selling a home through traditional means can also require funds to be spent on repairs and staging, while the latter isn’t required for iBuyers who will make repairs after purchasing.
iBuyers operate only in certain markets, with Phoenix and Atlanta home to the most activity.
Millennials are changing how homes are bought and sold
Millennials, the largest group of home buyers, are changing the home-buying process.
They expect online tools to help them through their home buying journey and are more comfortable with the idea of buying a home entirely online than any other generation.
Alongside the home-buying process moving online is the slow-but-steady growth of iBuyers, which have the potential to completely reshape the home-buying process.
Despite finding utility in new home-buying tools, almost two-thirds of millennial homeowners have at least one regret about purchasing a home, which indicates the home-buying process is far from perfect.
One certainty is that millennials -- and eventually Gen Zers -- will continue to shape the home-buying process alongside companies that aim to disrupt the way consumers have traditionally operated in the real estate market.
Sources:
- Bankrate (2021). "Nearly two-thirds of millennials have homebuyer regrets, survey finds."
- Mike DelPrete (2021). "2021 Emerging Models in Real Estate."
- National Association of Realtors, (2021). “NAR Home Buyer and Seller Generational Trends.”
- Zillow (2021). "Americans Want Digital Tools to Complement Traditional Home Shopping."
- Zillow (2021). "iBuyers Are Helping People Move in Record Numbers."
- Zillow. “What is the Average Time to Sell a House?”
- Zillow (2021). "Young Adults Who Saved During the Pandemic Likely to Put it Toward a Down Payment."
Our Research Expert
Jack Caporal is the Research Director for The Motley Fool and Motley Fool Money.
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