Home Owners Focus on Home Improvement Over Travel and Entertainment

The recent pandemic has changed home owner’s points of view on many aspects of homeownership. HomeAdvisor’s latest survey “State of Home Spending”, showed the average spent on home-improvements in 2020 rose to $13,138 from 2019’s $9,081.    

Although the survey says higher cost in labor and materials contributes to the higher number, it still shows an increase in American home owner’s spending average on actual home improvements. The National Association of Home Builders (NAHB) reported that 85% of Americans are spending more time at home because of COVID-19. Their spending habits are shifting from travel and entertainment to home improvement projects.

The housing market is hot and the increase in home buying has also fueled home improvement spending. Millennials, (those closest to the median age of first-time homebuyers) have been reported to have increased in home buying.

“Homeownership rates for millennials have jumped significantly, especially as COVID-19 has reemphasized the importance of the home and many companies move to flexible work location options,” said Mischa Fisher, chief economist at HomeAdvisor, in a press release. “Millennials are not only rapidly becoming home owners, but they are also spending more on home improvement than any other generation when they do.”

Those projects that have been important in 2020 have changed from those in 2019. The top 2020 projects were interior painting, bathroom remodels and new flooring installations. The top project which has made the list the last several years did not even make it onto the 2020 list. Prior years those that were surveyed by HomeAdvisor said that room remodels were the most important project.

The home maintenance project that saw the biggest increase year-over-year was cleaning and landscaping. The more everyone was at home with the stay-at-home orders, the messier the home could get. Cleaning and landscaping saw an increase from $1,105 in 2019 to $3,192 in 2020.

According to the survey, “painting was one of the most popular projects across nearly all age groups, because it is relatively affordable and offers a lot of visual value in terms of the look and feel of a room.”

American’s perspective on their home has changed dramatically in the wake of COVID-19. In fact, seven in ten respondents said that the pandemic had increased their need for home cooking, 50% were working from home and 40% were incorporating more home entertaining. The “State of Home Spending” survey summed up that home owners are using their home more and more and it has definitely become an even greater factor in their quality of life.

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Millennials Dominate When It Comes to Homebuying

When it comes to moving more, spending more and buying more, Millennials outpace the older generations.

Millennials have been in the lead for a year now when it comes to purchasing homes. According to , they have acquired more mortgages than previous generations. In the third quarter report, Millennials reached a share of 46% of mortgage originations, and 44% in primary home loan originations. Gen X was only reported at 17% and the Baby Boomers fell to 18% share in mortgage originations. As for primary home loan orginitations, Gen X was at 39% and Baby Boomers hit 16%.

Realtor.com

Several factors are driving the Millennial consumers. According to Porch.com, Milliannials move once every two years. They are also buying more expensive homes and increasing the size of their loans. Realtor.com’s Director of Economic Research Javier Vivas explains that Millennials are getting older, with better jobs and deeper pockets which give the ability to expand their collective purchase power.

Millennials median home price went up this year 6% to $250,000, while Generation X went up 5% and Baby Boomers increased only 2%. Millennials median loan amount is up to $231,590 which is a 7.3% increase from this time last year. Growth in mortgage debt for Millennials is also greater than

the 2.6% by the Baby Boomers and 4% by Generation X.

It will be interesting to see how the Millennials purchasing trend continues in the housing market. So far, Millennials dominate the housing market and it is said this will continue for years to come.

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New Homes Are Popular With Millennials

Many potential home owners have many different preferences when it comes to buying a home. According to the NAHB Economics team, millennials show an increase in interest in new homes built for sale and offered by a builder.

Statistics show that between 2007 and 2018, millennials who desired to purchase a new home, went

from 28% to 41%. Existing homes stayed around 40% in the 11-year time span and custom-built homes fell from 37% to 18% during the same time span.

The data shows that millennials, at 41%, are the first in the running when it comes to wanting a brand new home offered by a builder.  The next generation for this preference was seniors coming in at 31%. The bottom two were baby boomers at 29% and gen x at 28%.

Several factors play into the desire for new homes for millennials. They want to live in the central city, which is opposite for the majority that still want to live in the suburbs. Millennials want a set of

amenities that are not necessarily custom such as trash compactors, wet bars, built-in kitchen seating and an exercise room. Millennials are okay with smaller homes on smaller lots if they are able to get what they want in amenities and finishes.

Other data that was reported in the study looked at existing homes and custom homes built on owned lots. When it came to existing homes, baby boomers were the highest at 48%, gen x at 47%, seniors at 43% and millennials came in last at 41%. Those that desired a home custom built on an owned lot all hovered between 18% to 27%.


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Homeownership is The Way To Go

Rent is rising fast and many are turning back to owning vs. renting. According to the Unites States Census Bureau, in 2016 the decline in homeownership suddenly changed and started to rise. The Housing Vacancies and Homeownership survey reflects that homeownership rates rose from 63% in 2016 to 64.6% in 2018. Here are some of the reasons why this reversal has come to fruition.

Millennials had enough with living with mom and dad. In 2017, 22% of adults between the ages of 25 to 34 were living with their parents compared to the 11.6 % of adults between the ages of 25 to 34 that were living with their parents in 2005. This increase was due to the housing crisis, slow earnings

growth, soft labor market and steep student loan debts. As of 2016, Millennials started to be in the position to financially own a home. The homeownership rate for those under 45 began to recover very quickly. This is an important statistic for the housing market because Millennials (those born after 1981) will outnumber baby boomers in the near future.

“Millennials have been on a buying spree the last few years,” Zillow Research economist Aaron Terrazas said.

The groundwork for the turning point hit in 2015 when rental rates rose nationally more than 6% from the previous year. This marked one of the rare times that rent rose faster than home prices.

“Rent appreciation was so high during that period that it essentially put fire under people’s feet to get up and buy,” Terrazas said. “People who may have been sitting on the fence would be incentivized to jump into homeownership,” according to Terrazas.

Rising house prices also led to a quick reaction as Milleanials feared they would be priced out of the market. Terrazas commented that, “driven to homeownership by fears that with homes appreciating so quickly that they would be locked out of buying a home in their desired area.”
Another fear was that interest rates could go up so those who wanted to own a home needed to lock in immediately.

“Maybe people thought ‘interest rates could go up, I should lock in now,’ ” Urban institute housing expert Laurie Goodman said.

Those that were affected by foreclosures during the 2008 recession are ready to buy again. Those that went into foreclosure are now able to obtain a mortgage( it takes seven years for your credit to be cleared of a foreclosure). Buyers who were burned during the housing bubble are no longer gun shy, they are beginning to reenter the housing market.

Overall the unemployment rate is in better shape than it was a decade ago and there are more people out there ready to invest their money.

“When there’s very low unemployment, when there’s been slow but steady wage growth, that tends to make households confident in their ability to make what will probably be their largest investment of their life,” said Ralph McLaughlin an economist at CoreLogic.


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New Home Buying Trends of Millennials

Since the late 1990’s, home buyers interested in a buying a home have dramatically increased their usage of the Internet to find available homes for sale. In fact, 2016 statistics from the National Association of Realtors show that 95% of home buyers used Internet searches throughout their home buying process.  Of that 44% of home buyers started their home search online. And, 100% of home shoppers used the Internet to search for a specific property address.

Of these home buyers, 99% of Millennials, the new generation of home buyers, used the Internet to search for homes for sale compared to 89% of the Baby Boomer generation.  And, Millennials are known for their intensive and overwhelming dedication to complete research of any product that they will buy.  This generation is known for visiting multiple websites to compare just one product before purchasing it.  Also, Millennials are just now able to find employment in their field and begin to pay off student loans and begin their search for a home now that employment is on an upward trend after the Recession.  Because of the limited availability of extra cash for a down payment and the tightness of home inventory available to new home buyers, especially first-time home buyers, Millennials are interested in purchasing a home that does not need a lot of work or improvement in order to be able to support themselves and not spend money on repairs or renovations.

What has materialized out of this information is that Millennials may purchase a new home for sale, built brand new buy a builder instead of a “fixer-upper” home that requires additional money for upgrading or improvements.  Also, Millennials typically purchase their “starter home” with plans to move again soon in the future to a 2nd or 3rd home choice, so they actually spend less time in their first home purchase than previous first time home buyer trends would indicate.

This information has given valuable insight to professionals who assist Millennials in the search for the home that they are buying.  Builders know that Millennials may prefer to buy a new versus a previously owned home, so as long as they are a quality builder whose work is showcased effectively to a Millennial buyer, they start out with an “edge” over the competition.  This information has also helped Realtors who assist Millennial buyers by helping prep home sellers who have homes to sell in the price range of Millennial buyers to make sure their homes are improved, upgraded, and ready to sell without any additional construction or renovation work required.  Millennials tend to buy homes that are “just right.”

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