07/21/2021 | Press release | Distributed by Public on 07/21/2021 07:00
Last year, Joshua and Melody Menard were both working in tech, living in Seattle, renting a 600-square foot apartment and sharing the space with their two pups, Roxy and Lucy. At the time, they weren't unlike many city-dwelling millennials. In fact, 2019 data shows millennials preferred renting to buying.
However, when the pandemic hit, things changed. 'When we both had to start working from home, we quickly realized the need for more space. Spending upwards of $4,000 a month for rent, we were very motivated to find a home,' Josh said.
And so are 28 million other Americans who say they plan to purchase a home in the next 12 months. Amongst so much competition, how do you find and win the home of your dreams? In this report, we reveal exactly what it takes to buy a home in 2021's competitive real estate market, as well as what buyers across generations - from Zillennials, the micro-generation born between 1993 and 1998, a cohort typically closer to homeownership than Gen Z, and Millennials to Generation X and Baby Boomers - are prioritizing in their future homes.
Clear minds, full cash offers, can't lose
In this market, 25% percent of offers are all-cash, up from 15% a year ago. So, can you still win a home with a traditional offer? Well, across generational cohorts, 75% of sellers say a financed offer would need to be about 10% higher than a cash offer. Put into context, if your dream home is $500,000 and you didn't make an all-cash offer, you'd likely need to increase your bid by $50,000 to be competitive today.
However, most people, like Josh and Melody, don't have enough liquidity on hand to make an all-cash offer. That's where companies like Opendoor come in.
'The market is incredibly competitive right now and our biggest concern was overpaying and getting stuck with a home we didn't want. Thankfully, we used an Opendoor-backed offer to win our home, which was a complete game-changer. Opendoor backed our offer with all-cash so our bid stood out to the seller-we were able to provide certainty and flexibility in this insane market,' Josh explained.
With Opendoor-backed offers, buyers can present an offer waiving financing and appraisal contingencies, backed by our cash, that could increase their chances of winning the home. And according to our survey, if a cash offer comes from a company, like an Opendoor-backed offer, home sellers are more likely to opt for it.
In fact, a whopping 72% of sellers say they would prefer cash offers presented by a company on behalf of an individual or family compared to a traditional offer.
Trade-offs and tactics to win a home
Compared to other generations, Baby Boomers (42%) are more likely than other generations (25-33% for Zillennials, Millennials and Generation X) to anticipate that they will need to overpay to get the home they want.
Almost half of Zillennials (41%) expect they will not be able to get all the home features they want, more often than older generations (27-34% for Millennials, Generation X and Baby Boomers).
Of the four age groups, Millennials (38%) are most likely to worry they will have to settle on a different neighborhood, compared to only 14-26% for Zillennials, Generation X and Baby Boomers.
Lastly, like their younger cohorts, Generation X is more likely than Baby Boomers to need financial help to win their dream home.
When asked about trade-offs buyers are willing to make, most agreed (73%) they would wait a year to find their dream home. While only 27% of buyers say they would compromise to move now. This sentiment was consistent across generations.
Millennials seem to favor convenience more than older age groups. Almost half (48%) say they'd overbid for a move-in ready home, while 65% of Generation X are more likely to settle on a fixer upper to stay in budget.
Aggressive house hunters vs. buyer burnout
Many Americans are actively on the hunt for their dream home. In fact, it's such a time-consuming process that 57% of active home shoppers say they spend more time browsing online home listings than scrolling social media platforms like Instagram, Tik Tok and Facebook. Granite countertops, crown molding and hardwood floors are the new hot topics of conversation.
However, while there are many determined buyers, there are others who have decided to put their home search on hold. In fact, almost 4-in-10 Americans (38%) looking to buy a home in the next year say they've paused. Why?
Compared to other cohorts, Generation X is especially worried about finding major problems with the home they buy and having to move quickly. Millennials and Generation X, more so than others, are worried about their agent not having their best interests at heart. And not surprisingly, younger generations are more concerned about financing than older Baby Boomers.
What home features are most important
Over the past year, it seems everyone learned how to bake banana bread or attempted to become Martha Stewart in the kitchen. So, it makes sense that a modern kitchen ranked as one of the most coveted features across generations.
However, we noticed some big generational differences for others. For example, younger cohorts are prioritizing environmentally-friendly features like sustainably made materials, low/no VOC paint, drip irrigation, solar panels and tankless hot water heaters. And as the digitally native generation, they ranked smart home features, like speaker hubs, appliances, doorbells and security cameras, as very important.
It was somewhat surprising to see that office space was not ranked as high of a priority compared to other features. This could be due to the fact that more vaccines are rolling out and many companies are returning to in-person work. Alternatively, over the past year, people have realized just about any room in the home can be converted to a workspace - an extra bedroom, living room, or even a closet.
Searching for your dream home? Download the Opendoor app and see how we can help you find, tour and close on a home at your convenience.
Kerry Melcher is Head of Real Estate for Opendoor.
Methodology: Opendoor analyzed data from 850 people across the U.S. planning to buy or sell in the next 12 months. The data was collected via Qualtrics in May 2021. For the purposes of this report, Zillennials are defined as ages 25-28, Millennials are defined as ages of 29-39, Generation X is defined as ages 40 to 55 and Baby Boomers are defined as ages 56 to 74.