For millennial home buyers, it’s about ‘location, location, engagement’
Brandon and Allison Anderson knew exactly what they wanted — sort of.
The couple in their mid-20s started out looking for a three-bedroom, 100-year-old house on Indianapolis’ Eastside, close to work, near Mass Ave.
But they ran into, well, issues. They almost gave up.
“And then we broadened it, we broadened it, we broadened it,” Brandon said.
Their dream house morphed into a mid-century ranch. But, make no mistake, they did buy. And they are millennials.
Despite their image as a generation of renters — or as unemployed college grads living in their parents’ basements — millennials are not only learning the ins and outs of home buying, they are beginning to dominate the market. Even though people under 35 are not buying houses at the same rate as previous generations, nationally they are already the largest group of buyers.
Nationally, millennials purchased 32 percent of the homes sold last year, edging out baby boomers, who purchased 31 percent, according to the 2015 National Association of Realtors Home Buyer and Seller Generational Trends study.
It’s a trend reflected here as well. Local Realtors said millennials are an important and growing part of the market. So Realtors are adjusting to a generation that’s learning the ropes and wants to stay engaged.
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Much has been written about the millennials’ slow entry into the housing market, and what it means to the U.S. economic recovery.
According to data from the U.S. Census Bureau and the National Bureau of Economic Research, homeownership among people under 35 was at a little over 40 percent in 1982. As of 2014, homeownership in this demographic was at its lowest level in 30 years: 35 percent.
“We know how many of them are doing what economists characterize as family formation — getting married, having kids — they’re still doing that, there’s actually more millennials than baby boomers in the workforce, but they’re not getting in housing markets at the rate their parents did,” said Michael Hicks, a professor of economics and director of the Center for Business and Economic Research at Ball State University.
Millennials experienced the Great Recession and the collapse of the housing market in 2007, and college debt levels remain high, making it difficult for some to amass down payments.
“I’ve got one couple that did back off because they needed to get more down payment money saved,” said Nathan Pfahler, a Realtor with Re/Max Metro in Indianapolis. “The big thing is being able to save for that down payment.”
The Andersons both have student debt, but they say it did not prevent them from being able to make the down payment. “Down payments are hard, though,” Brandon said. “I wish someone would have said, ‘make sure you save graduation and wedding money for a down payment.’ ”
Pfahler said a lot of the millennials he has encountered are financially responsible. “They think about what if one of us loses a job. They feel like they’re taking a risk by going out and buying a house, but they’re not going overboard.”
For the Andersons, “a big factor was we wanted to start making an investment, instead of paying somebody every month,” Brandon said.
They started thinking seriously about houses last year when Allison was hired as a music teacher at Harshman Middle School. Brandon is a band director just down the street at Tech High School. And they wanted to locate near work.
It didn’t take long before they suffered their “first big loss.”
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In November, the Andersons thought they had found their house.
“It was perfect,” Allison said.
“It had a loft attic that had been turned into a bedroom that was tall enough for me, a bunch of great built-in storage, an updated kitchen, a really nice garage with all the security stuff and it was solidly in our price range,” Brandon said.
There was a catch — it had already sold. Their Realtor had asked beforehand if they would like to walk through it anyway.
Then came another hard truth. “We learned that hundred-year-old houses that we could afford usually had something like a mold problem in the basement,” Brandon said.The experience left them feeling disappointed.
“Or an open crawl space, we saw a couple of those, it’s just kinda creepy,” Allison said.
“Or lots of foundation problems,” Brandon said.
The couple were frustrated and discouraged.
“We would get real interested in a house, we would set up an appointment and we would drive to the appointment and get a phone call on the way saying it just sold,” Brandon said. “Everything sold in a minute.”
“And I’m not a make-a-decision-in-a-minute kind of gal,” Allison said. She likes to take her time, she said, especially with such a big purchase.
“I remember saying multiple times, ‘I don’t want to, I’m done, can we just take a break, I don’t want to do this anymore,’ ” she said.
Brandon said they had talked about renting in the area, but “it’s the same or more expensive. We might as well make an investment.”
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Their break came at an open house hosted by their Realtor. “She said, ‘you guys can look at it, it’s got a lot of stuff you want, but I don’t think you’d like it,’ ” said Brandon.
The house was built in the sixties and the entire kitchen, dining room, and small sitting area was covered in wood paneling.
“I was definitely turned off,” Allison said. “I said, ‘I am not going to deal with wood paneling.’ ”
But the house did have everything on their list: a studio where they could work, a guest room, and storage for their instruments plus it was in an older neighborhood. It was in their price range, around $100,000.
It was also a safe neighborhood. “One of the selling points was when we were looking at the house, the neighbor’s kids were playing in the yard by themselves,” Brandon said.
“We thought, that’s great they can go outside, their parents were inside and would come out and check on them, but they were playing like we did as kids,” Allison said.
“A lot of people want a mid-century house that maybe needs a little work,” said Kathy Hall, president of the Metropolitan Indianapolis Board of Realtors. “They don’t mind doing the rehab to get it where they want to be.”
“We drove straight from closing and spackled all of the wood paneling sealed and over the weekend we painted it,” Brandon said.
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“Location, location, location,” has long been the buzzword of Realtors, but millennials could end up ushering in a new one — “location, location, engagement.”
Hall said millennial buyers want to be more involved in the process, which has changed the way Realtors operate. “You have to be more of a resource for them and provide good points for the information they’re looking for,” she said.
“You can give them checklists and things to look for, but they want the experience of ‘I’m going to decide whether that is important or not important,’” she said.
In the past, Hall said, she would sit down with a potential buyer and have a one-on-one counseling session, but that wouldn’t necessarily fly today.
“For this generation, it may not be that sit-down. But is it a video conference? Is it sending them a document by email and going through it line by line?” Hall said millennials need to hear and see things differently.
Location is still king, although it, too, has a millennial twist. “Not a lot of millennials are jumping into housing because the homes are not in places they would like,” Hall said.
Like other millennials, the Andersons, both Indiana University graduates, knew where they wanted to be. They wanted to live on Indy’s Eastside, rather than the Westside.
They love how close their house is not only to their jobs, but to the Massachusetts Avenue entertainment district. “When we started going to Mass Ave., we were like, this is Bloomington, it’s the art happening,” said Brandon. “There’s lots of good food down in this area, too.”
While the Andersons got their jobs before they moved, many millennials choose the place they want to live first. In the 1970s about one-in-four households moved for a job, as opposed to about one-in-10 today, according to Hicks. He cited data from the American Housing Survey, which is funded by the U.S. Department of Housing and Urban Development.
Another change is in how people answer the question of why they picked their home. According to Hicks, when the question was introduced in the late 1980s, the share of people who cited schools and public services was below 10 percent. In 2013, just over 70 percent of people chose schools and public services.
“It reinforces what many of us thought about millennials,” he said. “They’re picking the place they want to live first and then looking for a job and buying a house.”
It’s good news for places like Indianapolis, Fort Wayne, Carmel and Fishers, Hicks said. “Those places are all growing because they have neighborhoods with good schools and plenty of public services.”
It’s not so good for small towns in rural areas, said Hicks. “If you say I want to go to Peoria or Muncie, those choices get down to really small numbers of neighborhoods.”
Whatever their reasons for buying, millennials are proving one thing hasn’t changed. “Part of the American Dream is homeownership,” said Kurt Flock, a broker and co-owner of the Downtown-based Flock Real Estate Group.
The Andersons said they love their house and neighborhood. They have a wide sun porch that their three cats love to sun on.
They’re also planning on getting a puppy during their fall break.
“The way everything worked out, we have more equity than we spent at this point,” said Brandon. “It appraised really high. Much higher than we paid for it.”
Follow Star reporter Gabby Ferreira on Twitter: @Its_GabbyF.
Move-up buyers drive housing recovery; millenials keep renting