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Looking for homebuying tips to find the right house for your clients?

In a residential real estate market where competition for new clients is fierce, real estate agents seek insights into the mindset, motivation and preferences of buyers of different generations. It is more complicated than ever, with multiple generations of individuals and couples in the homebuying market, each at a different stage in their homeownership journey.

The pool of prospective homebuyers is by no means a one-size-fits-all market. Some are just starting out, while others may have purchased multiple homes over their lifetime and know exactly what they want and how to get it.

Getting in front of active and future buyers requires doing homework to understand them better. Industry data and research helps to paint a picture. In some cases, it reinforces perceptions of specific generational buyers. In other cases, it brings key facts to light that can help real estate agents figure out how to best serve the needs of these distinctly different groups – and where to find them.

In particular, real estate agents must pay close attention to two key groups: millennials and baby boomers. By size alone, they are a driving force in the market. Millennials recently surpassed all other groups as the biggest generation, with roughly 72.2 million people in the U.S., while boomers are a close second at 68.6 million, according to Statista.¹

Combined, these two groups represent nearly two-thirds of homebuyers, according to the latest Home Buyers and Sellers Generational Trends report published by the National Association of Realtors (NAR).²

What are the homebuying preferences of the four key generations?

Here’s a closer look at key characteristics and drivers of the four main generational groups.

Baby boomers have jumped into the lead as the dominant group in the homebuying market, largely because they have more equity built up in their existing homes and are less sensitive to higher mortgage rates. Boomers are more likely to purchase to be closer to friends and family, including their adult children and grandchildren. They also like to be near convenience amenities, such as recreation, retail and healthcare.

Key characteristics: This generation has a reputation for its discipline and strong work ethic. Today’s boomers are healthier and more active than their parents’ generation and many choose to work beyond the typical retirement age.

Motivation: Although this group of buyers is motivated by various reasons, a common theme is that many are in transition. Some are retiring or at a stage where they simply want a more maintenance-free lifestyle—less grass mowing and snow shoveling. According to homeowner.com,³ many also look at this purchase as their last one and are choosing homes where they can age in place. As such, they are interested in simpler floor plans and more single-level living space.

Gen Xers experienced the 1980s recession, the dot-com crash of 2000 and the Great Recession of 2008, which shook their confidence in job and financial security and made them more cautious about home purchasing decisions.

Key characteristics: The “latchkey” generation of Xers are known for being independent, resourceful and entrepreneurial. According to NAR, this group remains the highest-earning homebuyer group, with a median income of $114,300 in 2021.

Motivation: Compared to other age groups, this group is more likely to purchase for the desire to be closer to a job/school/transit or for a job relocation or move. According to NAR, nearly three-fourths of Gen Xers prefer a detached single-family house, a higher percentage than any other age group.

Although nearly half of millennials now own homes, many who haven’t yet purchased a home believe homeownership is increasingly out of reach. According to a Bankrate Financial Security Survey,⁴ personal affordability issues keep 78% of aspiring homeowner millennials from purchasing a home. In comparison, 59% said that the current housing market/economic conditions are holding them back.

Key characteristics: This generation is confident, tech-savvy and values work/life balance. According to NAR, elder millennials had one of the highest shares of married couples, at 66%. Younger millennials are the most educated age group, with 80% holding at least an associate degree, which bodes well for their future purchasing power.

Motivation: Despite hurdles, millennials comprise the biggest group of first-time buyers. Some key drivers behind the decision to buy are marriage, kids and a desire to have more room for pets. According to NAR, when considering location, convenience to job was more important to this group than other generational groups.

Given the young age, it’s no surprise that this group is just starting to dip its toe in the water of homeownership. As such, real estate agents can add value by educating and providing resources to their clients to build long-term relationships.

According to NAR, Gen Z homebuyers purchase the smallest homes across different groups of buyers: a median 1,480 square feet. Thirty percent of Gen Z buyers move directly from a family member’s home into homeownership.

Key characteristics: This group has grown up with smartphones and social media. Most use their phones to research purchases before they buy, and they are more receptive to ads on social media versus email or online advertising. Gen Z also is more racially and ethnically diverse than any other generation.

Motivation: Gen Z homebuyers see the value of owning versus renting, and are motivated by the chance to invest in their future. According to Bankrate, 63% of Gen Z respondents associated owning a home with the “American Dream.” Their home search often focuses on finding a location close to friends and family.

Leverage the expertise of your mortgage lender

Understanding what drives these different groups can help real estate agents deliver better service and build strong relationships. At the same time, it’s important to remember that people are all unique. Real estate agents should talk with prospective clients to fully understand their life goals and objectives and not get tripped up by generational stereotypes.

Another common theme that spans generations is that, despite digital technology, real estate agents and brokers remain the top home-buying and selling resource for all generations, according to NAR. Buyers rely on guidance from a real estate professional to help them find a home that fits their budget and needs and help negotiate terms and purchase price. Despite higher mortgage costs, most homebuyers also continue to use a mortgage to help finance their home purchase.

Realtors should work with an experienced lender who understands generational housing market trends, whether a client is retired with a fixed pension or a Gen Z buyer who may still be building a credit score. Engaging with a mortgage loan officer early in the process can help homebuyers understand their financial options and set realistic goals and a budget to help put them on a path to success for buying a home or vacation home.