We’re all guilty of repeating the tired clichés about millennials being forever renters and never buying their own homes as generations before them have done. Well, fuhgeddaboudit.
New research shows that not only is this generation – now the largest demographic group in the country – buying homes but more of them are now homeowners than renters. It’s a remarkable transformation for what has to be one of the most over-analyzed yet misunderstood groups on the American population landscape. And with this huge shift, it means potentially big changes for the retailers that sell products to homeowners: the Home Depots, Lowes and home improvement stores that supply new kitchens and bathrooms; the home furnishings stores that sell them furniture, rugs and lighting, and all the other businesses that have up until now written off millennials as non-customers for homeowner-related merchandise. Retailers will need to offer different products, sold in a different way with the accompanying service level they haven’t had to offer previously. Millennials area different breed of home customer. And you thought you knew who your customers were.
Millennials may want a brand and a premium product, but they want to hear the backstory of it’s worth: is it eco-friendly, sustainable, from a company promoting diversity and socially correct? They want all the details and won’t fall for empty advertising messages.
The New Home Run
For a long time, it seemed that millennials were going to be the generation that would break with past traditions and be largely renters, giving up the American dream of home ownership. And in fact, that was the case for a long time as millennials held off buying homes until they were much older. Historically, the average age of a first homeowner has been 33, according to theZebra.com, a website for insurance information. But in 2022 that jumped to 36 years old, confirming that millennials are buying, they are just buying later in life.
Maybe it was the pandemic, but just as likely it was inevitable. Millennials are now in their “prime home-buying years,” and the pandemic, which caused many in this age group to move in with their parents, may have actually helped the home buying surge.
Over the past few years, the surge in home ownership among this group has been remarkable. New research from the online site RentCafe, which looks at the apartment market, shows what it calls a “historic shift” in the percentage of millennials owning homes. Millennials gained 10.8 million homeowners in the last decade, including 7.1 million in the last five years to reach 18.2 million in 2022. This pushed the balance in favor of homeownership to 51.5 percent of the age group. “The pandemic and the evolution of the real estate market during the last few years didn’t suppress millennials’ appetite for buying homes,” the website states. “On the contrary, most millennials are now sipping their matchas in their own homes rather than in rentals.” RentCafe adds, “With work-from-home supporting these decisions, many millennials saw this period as an opportunity to save for a down payment.”
Even with the recent surge, millennials still trail their baby boomer parents in the percentage who own homes: 80 percent of those golden oldie boomers are homeowners. About two-thirds of Gen Xers own homes and now with this new shift only Gen Z members remain predominantly renters. Even though millennials still trial their parents and older siblings in home ownership, the sheer size of the group means companies that cater to homeowners now have to get ready and rethink their strategies.
The Furnishings Future is Now
For the past decade or so retailers selling products for the home – be it furniture, appliances, kitchen cabinets or home improvement items – have focused most of their attention on older shoppers – boomers and Gen Xers. Millennials were a small portion of their business, and they targeted goods more suited for rentals to this demographic.
That’s about to change:
- Furniture: It’s not a hard and fast rule but homes are generally bigger than apartments and have more rooms. Homeowners can buy bigger sofas, bedroom items like larger mattresses and even dining room sets than they could for their rentals. They will also often spend more because they know they will be in their homes for some time as opposed to the more transient nature of apartment living.
- Lighting: Renters are notoriously big lamp buyers and would never think about buying a chandelier or what the trade calls hard-wired lighting. Now they will.
- Flooring: Even though wall-to-wall carpeting sales are in decline, it’s another item that renters would never buy but homeowners would. More likely are hard floor coverings like wood, tile, and vinyl flooring. Renters might buy a small area rug but that’s about all they thought of when it comes to what is below their feet.
- Home Improvement: Obviously, renters rarely worry about things like new windows, flooring, or HVAC (heat, ventilation, and air conditioning) systems. Now they are on their shopping lists. Same for kitchen cabinets, plumbing fixtures and home exterior products like siding, roofs, and walkways.
- Outdoor: This is another home area that usually doesn’t exist in apartments, or if does it’s often just a small terrace. Now we’re talking backyards, patios, and decks…and the corresponding outdoor dining sets, chaises, fire pits, barbecues and water features that every self-respecting new homeowner lusts after…just like their parents did.
Taken together, the stores that sell all these things – DIY chains, large furniture dealers, outdoor specialty shops, flooring stores and lighting showrooms – are all in line for pick-ups in business as the percentage of homeowning among millennials continues to climb. More importantly is the change in attitude that comes with these new customers. Boomers were aspirational shoppers and responded to the brands their parents knew and trusted. Millennials, not so much. They may want a brand and a premium product, but they want to hear the backstory of its worth: is it eco-friendly, sustainable, from a company promoting diversity and socially correct? They want all the details and won’t fall for empty advertising messages.
It will be a process for these retailers to rethink their selling approach, especially after many of them figured they could keep living off the boomers forever. That generation will still be buying for a while longer but as with so many things they are being replaced by millennials. That is, until Gen Z comes along…