Millennials Skipping Starter Homes and Going Straight for Luxury Homes
The starter home, long associated with the first experience of homeownership, seems to be falling out of favor. The millennial generation is charged with killing many trends, from entertainment habits to job tenures. And now their impact is being felt in the housing market as well.
According to a recent story in the Dallas Morning News, millennials are bypassing the starter home and going straight for luxury homes instead.
Luxury home builder Toll Brothers Inc. stated that 23 percent of its sales this year were to customers with at least one buyer age 35 or younger. The average contract price for a Toll Brothers home is $837,000, well into the category of what would be considered a high-end or luxury home.
This defies the traditional thinking about younger buyers age 18 to 34, who have typically been more likely to purchase lower-priced homes that may be small or need more improvements. While younger buyers only own 11 percent of owner-occupied homes, a lower homeownership rate than among previous generations, delayed marriage trends are a significant reason for lower ownership rates.
"We've been pleasantly surprised," Fred Cooper, vice president of investor relations at Toll Brothers Inc., told the Dallas Morning News. "These people, who may each have 10 years of work under their belts, can afford a first home that is more luxurious than what one thinks of as the typical starter home."
However, not all buyers are waiting to buy homes until they can afford a luxury home. Previous reports have revealed a limited amount of home inventory in the affordable or “starter home” category.
Millennials and other home buyers have fewer options in the starter home category as the housing market tightens. Luxury homes may be easier to find, but that does not necessarily reflect the purchasing power or desires of those searching for a home in North Texas.