Keith McKinney, VP of Organizational Development, presented “How to Appeal to the New Generation of the First-time Homebuyer” to a packed house at the International Builders Show 2024. Dive into his insights and advice for building a home for first-time home buyers.
The real estate landscape is ever-evolving. Building a home for a first-time home buyer doesn’t mean what it used to. That’s because the home buyer has changed drastically. Generation X couldn’t wait to get out of the house. Once they graduated college or started working full-time, they focused on how quickly they could move out of their parents’ homes. Fast forward to today, and many young adults are staying put. They don’t have a move-out date in mind unless they can get exactly what they want without settling.
Targeting this new generation of homebuyers is paramount. But first, it’s important to understand how we got here.
In 2023, baby boomers comprised the highest share of home buyers at 39%. This is followed by millennials at 28% and Generation X at 24%. It’s important to note that baby boomers are used to staying in homes for a long period of time. Throughout their lives, they have probably only bought one or two homes. Have you ever tried to help out your parents or grandparents with a house remodel or a new, better home? Of course, they always respond, “No!” They are happy where they are!
As baby boomers raised their children, Generation X, they encouraged them to strive for better. As a result, Generation X had more income and could buy larger homes. So, their children, millennials and Generation Z, grew up in McMansions and are accustomed to the large space and the many upgrades. Because of this, these generations are not willing to settle. They do not want to move into “start-up” homes; they are willing to wait and save up more money to buy exactly what they want.
Here’s what we know:
These key stats are paramount when planning your inventory and building strategy. We are quickly moving away from the the baby boomer generation with one or two homes in their lifetime to Generation X and millennials who want more and are willing to pay for it.
For the longest time, we generally grouped first-time home buyers into three categories:
We also put affordable housing and first-time home buyers in the same category, thinking that buyers were spending less for their first home. This isn’t the case anymore.
So, who exactly are these buyers that make up this new generation?
We like to call them Stable but Stagnant, Young, and Fun (SBSY&F). And it is a bit rough out there for them. The number of high-paying jobs out of college is on the low side. Those in this SBSY&F group are between 25-39 years old and 64% have a household income between $75k-$100k, while none earn more than $100k. Plus, 55% have a net worth of less than $100k, with 82% having less than $250k. This is something to note when building a home for a first-time home buyer.
This is another reason so many choose to live at home rent-free. This allows them the time to save up for a down payment so they can afford exactly what they want. In fact, the top purchase priority for SBSY&F was finding a home that better fits their lifestyle (45%). And, once they put their mind to it, these buyers are ready to move fast. Fifty percent of buyers purchased within a month of getting serious, meaning builders need to have inventory ready and available.
We also know that 70% of younger millennials (aged 24-32) and 46% of older millennials (aged 33-42) will be first-time home buyers. This reiterates that this generation is waiting and saving so they can afford the home they want. Millennials are also willing to pay a higher interest rate. A recent Builder Online analysis showed that they would consider an interest rate of 6.2% — much higher than baby boomers who said they would consider 5.5%.
Let’s stress something: It really doesn’t take much to make them happy. Builders don’t need to change everything they’re doing to appeal to first-time home buyers. There are a few minor things that will help.
When building a home for first-time home buyers, technology is one of the biggest drivers of this group. And it doesn’t have to be expensive; it just has to be convenient.
Think about the last several years. We went through a pandemic, and we had to seclude ourselves. Our lifestyles changed. Our priorities changed. The workforce shifted to a remote environment. Suddenly, homeowners found themselves needing more outlets and better tech.
This should be priority number one for builders asking how to appeal to first-time home buyers. Something as simple as the placement of outlets and USB hookups will be top-of-mind as these first-time home buyers walk a model home.
Most first-time home buyers are used to living in a 10x10 box — the room at their parent’s house. They have lived with their parents for several years and require the comfort and convenience they are used to. To put it bluntly, they want to be served. They need access to everything they desire.
While their room is small, they have access to large areas. The yard, the kitchen, the pool. They don’t necessarily need their own pool; they just need to have access to one. The same can be said about square feet. Again, they are used to living in a small space. But they need access to these larger conveniences.
Many builders who build in the luxury market have believed that their buyers are only move-up buyers. This just isn’t the case anymore. These first-time buyers are your buyers. Realize that you now need to market to this group and accommodate their needs.
Those who build luxury townhomes and condos must make it convenient for these buyers. Look at the amenities you offer and brainstorm how to market those conveniences so you can appeal to first-time home buyers.
The good news is that we’re here to help. Our home builder consulting team is ready to provide you with a winning strategy and data-driven approach. Reach out to one of our sales consultants today to discuss how best to begin building a home for first-time home buyers.