Unlike their parents or grandparents, Millennials do not plan to live in the same house for 40 years. One reason is likely due to a change in personal ideals and mindset. According to the latest ValueInsured Modern Homebuyer Survey, while “owning my own home” remains – just like for their parents – the top personal definition of the American Dream for Millennials, two other popular answers are “having the freedom to pursue opportunities wherever they are” and “being able to move and live wherever I want”.
A second – and related – factor is the reality of the modern job market. According to the latest U.S. Census Bureau data, the average job tenure of a Millennial is 3.0 years, and more than 1 in 5 Millennials moved in 2015.
A third reason Millennials do not plan to own and grow old in the same home might have something to do with the affordability of their first home. In 1970, the medium home price in the U.S. was 1.7 times the annual medium household income. Today, that home price to income ratio has jumped to 3.6 – more than doubled. This forces many first-time homebuyers to buy what they could afford for the time being, instead of a “forever home” they can grow a family in for the long haul.
This is echoed in the latest ValueInsured Modern Homebuyer Survey. Results show only 14% Millennial homeowners plan to live in their current home for 7 or more years. 73% Millennial homeowners said they plan to live in their current home for under 5 years, making them highly susceptible to home value loss in case of short-term housing market fluctuations.
Number of years Millennials homeowners plan to live in their current home:
- Under 1 year: 14%
- 1-3 years: 35%
- 3-5 years: 24%
- 5-7 years: 13%
- 7+ years: 14%
When asked how many homes Millennial homeowners plan to own in their lifetime, 67% expect to own 2-3 homes, and 13% anticipate they will own 4 or more homes.
This new normal of serial homeownership makes this next generation of homeowners prime target for home upgrading. In ValueInsured’s latest research, a whopping 88% of all Millennial homeowners surveyed said they would like to sell their current home and upgrade to a new home. This high motivation for upgrading could have strong implications for home-sellers, real estate and mortgage professionals. It also means Millennial starter homeowners could soon be freeing up inventory for the next wave of first-time homebuyers.
Good news for potential home-sellers: most Millennial homeowners feel confident they can afford the down payment to upgrade to a new home. Many appear to feel bullish about value appreciation of their starter home – 94% believe they can sell their current starter home for the same amount or more than what they paid for, and 93% believe they can afford the down payment on their next upgrade home.
Two remaining factors that stand in the way of Millennial homeowners who want to upgrade are lukewarm confidence in the higher-priced housing market once the stakes are higher, and their confidence in safe-guarding their down payment investment on their next home. 87% of all Millennial homeowners surveyed said they would sell their current home and upgrade to a new home sooner if they had more confidence in the housing market. Likewise, 85% said they would sell and upgrade sooner if they could be confident they would not lose their down payment on their next home even if the housing market goes down.