Recent reports that the millennial generation was foregoing homeownership in favor of renting may have been a bit premature.
According to Toll Bros Inc., the largest U.S. luxury-home builder, millennials have become a force in the market for new high-end homes. Toll Brothers says that 23% of its sales this year were to customers with at least one buyer age 35 or younger. That was a surprise, given that the company’s average contract price in the three months through July was $837,300.
Buyers in their 20s and 30s have been slow to purchase for good reason. They’re marrying and having children later and face a tight existing-home market, where sellers routinely get multiple offers. But the delay has given some of them time to save for a down payment.
“We’ve been pleasantly surprised,” indicated Fred Cooper, senior vice president of investor relations at Toll. “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.”
Homeownership by young people is still low by historic standards. Buyers from 18 to 34 years old possess 11% of U.S. owner-occupied houses, according to an analysis of Census Bureau data by real estate website Trulia. When baby boomers were that age, they owned homes at almost twice that level.
Megan McGrath, an analyst at MKM Holdings LLC in Stamford, Connecticut, said Toll now is seeing only the oldest of the millennials among its buyers. Many more will follow, she said.
“Part of it is generational — millennials didn’t feel the need to buy a starter home, and maybe couldn’t and they waited until they were in their 30s,” she said. “Maybe now they’re just skipping over the starter home and buying a higher-priced alternative.”