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Millennials Choose Existing Homes Over New Ones

Millennial homebuyers a riddle to builders

Nov. 16, 2015

By GABRIELA RICO The Arizona Daily Star - Tribune News Service

Millennials have put off homeownership longer than any generation before them.

And now they're entering the market with specific desires and budgets.

Millennials, born in the 1980s and 1990s, expect a little space between neighbors, and they don't like cookie-cutter homes. They want open floor plans, less carpet and seamless indoor/outdoor living.

As a result, they are choosing existing homes in established neighborhoods -- and that's creating a challenge for home builders who desperately want to attract this generation that is soon to overtake baby boomers in size.

"Can we build what they want, where they want it, at a price they can afford?" housing analyst Ginger Kneup asked. "Now that the millennials are starting to buy homes, they're least likely to buy new houses.

"As a home building community, we have a problem."

So far this year, Pima County has seen 12,400 homes sold -- about 1,200 more than last year. Of that 1,200 gain, only 87 were new homes.

"It's not as simple as just price or just location," Kneup said. "If there's things in an existing home -- that may not be that old, located to whatever (amenity) they value and it's $30,000 to $50,000 less than a new home -- they're going to choose an existing home."

Because of that, permits for new home construction -- although growing -- are not roaring back to life.

In 2005, Pima County issued nearly 11,800 permits issued for new home construction. So far this year, there have been 2,250.

"If floor plans for homes under $250,000 are the same as they were 10 years ago, that's not going to attract younger buyers," Kneup said. "More relevant product for that generation is needed."

Earlier this year, Ron and Amanda Duncan bought their first house in Corona de Tucson. It was built in 2006.

"We wanted to buy because we wanted to start building equity," Ron said. "It took almost a year to find the house we liked."

The selling point?

"We didn't want a cookie-cutter house, built on top of another one," he said. "The yard size was important, especially here in Tucson where the sun is out almost 365 days a year. We've been hosting barbecues and events in our backyard."

Ron, 28 and Amanda, 25, saved up for more than a year for a down payment and got pre-approved for a mortgage so they knew what they could afford.

"It's our starter house, and we did not want to be upside down," he said.

Big Yards, Amenities
Realtor Susan Marshall, with Tierra Antigua Realty, said typically millennial homebuyers come in with a pre-approved mortgage and say, "Let me see everything you've got in that price range."

"They're trying to get the most house that they can for their money," Marshall said. "It doesn't matter if it's new or older."

That said, big yards and space between neighbors are two requests she hears frequently -- and those things are hard to find in the less-expensive new homes many younger buyers can afford.

"They don't want to pass sugar out their window to their neighbor," she said.

And because millennials are generally social, they quasi-promote older homes to their friends.

"During backyard barbecues, they say, 'Look at this deal I found' about a house built in the 1970s or 1980s," Marshall said.

Ranging from just-out-of-high-school 18-year-olds to married-with-kids 34-year-olds, millennials are vastly different from one another, and that makes serving them difficult, said Rosey Koberlein, CEO of Long Companies.

"They want socialization with their friends, big yards, nightlife and amenities within walking distance," Koberlein said. But where they want to walk and what amenities they want can vary widely.

Figuring out how to reach them is worth the effort.

Lending rules, which were tightened after the housing crash, have relaxed a bit, Koberlein said, so millennials' buying power has increased.

Home builders recognize the need to attract millennials but are struggling with how to do that, said Amy McReynolds, senior vice president of KB Home Tucson.

"We have to offer a product where they want to live at a price they can afford," she said. "But that's easier said than done."

Land closer to downtown is more expensive, for example, making it difficult to keep the cost of homes low.

It's up to the industry to promote the advantages of new homes, such as energy efficiency and built-in technology, she said.

"Unlike in the run-up when people were over-buying, this generation is being very cautious," she said.

KB Home has four active communities in the Tucson area and four more coming online next year. One, which McReynolds hopes will appeal to millennials, is on the Santa Cruz River within walking distance of the Spectrum shopping area west of Interstate19 and Irvington Road.

"I would have loved that in my 20s," she said. "Walk to Jerry Bob's for breakfast, shop at Bed, Bath & Beyond, then go to a movie."

The silver lining is that as millennials move into the resale market, it allows the seller to move up to a new home, she said.

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Copyright (c) 2015, The Arizona Daily Star, Tucson

Distributed by Tribune News Service.

This story was distributed by TNS - Tribune News Service
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