Millennials skip right to dream houses

Frugality helps group to buy its ‘forever’ homes

Mike Sullivan, 31, bought his first house a few years ago after saving up for years, but it’s not a typical one or two-bedroom starter house. He paid $360,000 for the four-bedroom, 2,700-square-foot ranch on Long Island. He calls it his “forever home.”

Millennials put off buying their first home as they struggled with the aftereffects of the Great Recession. Now that they’re snapping up houses in greater numbers, many older Millennials are making up for lost time: They’re bypassing the traditional gateway to homeownership — the starter, or entry-level, home — and buying larger, more expensive houses where they’re likely to raise families and maybe even grow old.

“They rented for longer,” says Diane Swonk, chief economist at Grant Thornton. “Now they’re going to where they want to stay,” possibly for decades.

By renting or living with their parents for years, many Millennials in their mid-30s can now afford pricier houses because they’ve socked away more money and moved up to better jobs, Swonk says. And they need the extra space because they’re finally getting married and having kids after deferring those transforming events. Also nudging them into more lavish houses is a severe shortage of lowerpriced starter homes.

There’s no hard-and-fast definition of a starter, or entry-level, home but a one or two bedroom typically would qualify, says Lawrence Yun, chief economist of the National Association of Realtors (NAR). Prices vary but starters on average cost $150,000 to $250,000 while trade-up and premium homes cost upward of $300,000, Swonk estimates.

Thirty percent of Millennials bought homes for $300,000 and higher this year, up from 14% in 2013, according to NAR.

But older Millennials are even purchasing bigger homes than their predecessors at similar ages. From 2012 to 2016, nearly a third of buyers age 33 to 37 bought four-bedroom homes compared with about 24% in that age group in 1980, 1990 and 2000, according to an analysis of Census Bureau data by Ralph McLaughlin, chief economist of Veritas Urbis Economics.

Millennials, in fact, are purchasing more homes than any other generation. They made up 36% of home buyers last year, up from 32% in 2013, NAR figures show.

By waiting to buy until their job status and income grew, Millennials have been able to land their dream houses at an earlier age, Yun says.

Also, many young adults are moving from high-cost areas such as New York City and California to relatively inexpensive Southern states.

Meanwhile, there’s a shortage of houses across the USA, but it’s particularly severe for starter homes.

Many Millennials in their mid-30s can afford pricier houses. GETTY IMAGES