Transcript:
Dean Wehrli:
Welcome to New Home Insights. I’m your host Dean Wehrli, the John Burns Real Estate Consulting Podcast about new home insights. Today we have Sidney Pell. She manages John Burns’ consumer insights and explores what home buyers are thinking, what they’re doing, what they want, what they don’t want in a home. Sidney, how are you doing this morning?
Sidney Pell:
I’m doing well. How are you?
Dean Wehrli:
I’m good. Today’s topic, we’re going to talk about millennials, but more specifically, not so much about what they are as about what they are not. Some millennial myths. We’re going to MythBust today without science and explosions though. Well, actually, science but not explosions. Are there going to be explosions Sidney? I should ask you first.
Sidney Pell:
I’m hoping not.
Dean Wehrli:
Yeah. We’re going to debunk things like myths about millennials and home buying. Their wants, their needs, their hot buttons, and really, we’ll spend some time on how they differ or don’t differ from their parents. So, let’s start with a very widespread myth. At least you’re going to tell me, it’s a myth. I’m not so sure because I have millennials as kids. This idea that millennials are lazy. They’re just a bunch of 20 somethings who should have started a family and bought a house by now just as God intended, but they haven’t. What’s going on there? Is it social? Is it economic? What’s going on with this idea that millennials are lazy?
Sidney Pell:
I think that is just what it is. It’s just a myth. So, the earliest millennials right now are reaching a 50% home ownership rate. It’s just a little bit later. So, they’re at 36 years old, which is a little bit older than previous generations, but they still want to own and the reason they’re doing it, it’s not because of social pressure. It’s not because you have to go do this. You’ve reached a certain age. Nobody considers renting what you would call a non-achievement. Nobody’s really looking down on anyone for renting. It’s just a really practical way of living for people who have a specific kind of income in mind or have a specific kind of lifestyle. I think what you will find is that this particular set, millennials, if you will, are very frugal and very financially conscious and that really spins that whole idea that they’re lazy on its head.
Sidney Pell:
They’re just very practical when it comes to spending their money.
Dean Wehrli:
So, they don’t feel like they’ve not achieved, not accomplished something if they’re not buying a home by the time they’re in their … whatever, late twenties or something like that.
Sidney Pell:
No, not at all. I think that whenever you look at … again, the average age is about 36 years old across the nation for whenever a millennial buys their first home. I think, when you consider that, it’s really important to also understand that as they’re considering making these purchases, it’s really just about timing. It’s about making sure that it’s the right house at the right price at the right time. Those are the three things that really go into that decision and that’s what’s important to them.
Dean Wehrli:
I mean, their primary alternative is clearly going to be renting, right? In the stereotype of living in mom’s basement, there’s definitely a lot of that, but many of them prefer to rent. Is that fair to say?
Sidney Pell:
Well, I think there’s a couple of things to consider whenever we’re looking at what’s actually that key that’s keeping them from buying. Again, it’s not so much that they’re not buying, they’re just buying later in life. There’s this idea that student debt is keeping them from buying. I know that a couple of years ago we did this white paper that said student debt reduced home buying activity by 8%. They’re still buying, it’s just later in life. A lot of people think millennials just aren’t financially savvy, that they don’t realize it’s something that they “should” do. But when you look at what these particular buyers went through during the last recession, these are people who saw loved ones lose everything and they understand that if you lose your job after you’ve bought a home, you can lose your home.
Sidney Pell:
You literally can lose everything and go bankrupt and that’s something they don’t want to experience on their own. So, they’re perfectly fine taking time in making that big purchase.
Dean Wehrli:
Okay. So, myth number one, they’re not so much lazy. There are a lot of other considerations going on there. Let’s look at myth number two. Entitlement. It’s the idea that Chet, the millennial, wants to come into that hot startup and be at least CFO, if not CEO, let’s be honest, and then start piling up stocks and waiting for the IPO. That’s the idea here. How much of a myth is that? Are there some other considerations going on there from millennials that bust this idea that they feel entitled?
Sidney Pell:
I think it’s less about entitlement and it’s definitely more about quality of life. I think that’s one of the things that is incredibly important to millennials. That includes being able to spend time with your family, spend time with your friends, actually having free time, going out and doing some really cool stuff. This is a group that would rather spend money on an experience instead of stuff.
Dean Wehrli:
So rock climbing in Tibet. Is that not ambitious enough? Are we talking trips to maybe go see the Dalai Lama, that kind of thing?
Sidney Pell:
Let me tell you this. I know a guy that went and spent a year in a Buddhist temple because he wanted to find this balance in life. And we are of the same age and shock. I am an older millennial. So, that was one of the things that was really critically important. Now, married, he’s got kids, they bought a beautiful home. He’s a very successful person, but he was really focused on finding this wonderful, mental, spiritual experience. That was really important. And not everybody goes to that kind of extreme, but it is important to remember that experiences really do set millennials apart from other buyers.
Dean Wehrli:
So, travel. So, they’re spending their money to some extent. Is that one of the reasons on these experiences, right? So, is that one of the reasons why they’re buying later or why they’re renting to dovetail with the previous myth?
Sidney Pell:
Well, I think that they may not want to trade in on those experiences, if you will, for a home that they think is just a huge investment of time and money. Something that keeps them from living that life to the fullest. So, it’s a huge opportunity, especially when you’re thinking about your messaging or your marketing. If you’re a builder, trying to reach out and say, “This is an experience that you want to have and we can give it to you.” Another thing to consider too with this particular group is that they’re constantly seeking to move up in life. They’re striving to move onwards and upwards and constantly wanting to upgrade the experience. This is very dissimilar from their workaholic parents, people who were happy going into the same job day after day, year after year, decade after decade until it came time to retire.
Dean Wehrli:
Are they more altruistic or is there just a different set of ethos going on with millennials or is that overstating it?
Sidney Pell:
No, I don’t think that’s overstating it at all. I think altruism is definitely a bonus when you’re thinking about millennials. They value the role that they actually play in the community. How am I contributing? How am I giving back? In fact, 73% of millennials will spend more on a brand that is sustainable. And even bigger than that, 81% of them expect their favorite brands to make this public declaration of their corporate citizenship and social responsibility. So, if you’re building a really efficient home, you should really put that out in front of millennials and say, “here’s something that we’re doing that sets us apart.” And it speaks to that altruism that they actually expect from brands they purchase with.
Dean Wehrli:
That’s interesting because historically, things like solar … when folks were looking at a new home and they’re looking at solar, if it wasn’t subsidized, they were reluctant to spend that kind of money upfront and the choice typically was based on saving money, not based on doing right by the world.
Dean Wehrli:
So, if you’re right, then that says good things. We spoke with CR Herro from Meritage Homes about some of these issues, just our last podcast. So, does that speak to this idea that we are going to see builders be able to separate themselves or even have to be super efficient and very environmentally friendly going forward?
Sidney Pell:
I think it’s an expectation. You look at the environment, you look at how millennials are actually influencing companies already. Influencing how they’re spending, influencing what they’re actually offering, and supporting that social consciousness and it just seems like the natural evolution, if you will, of the way things are going. You think about builders like thrive builders out in Colorado who are building a luxury healthy home for buyers and people want that experience.
Sidney Pell:
They want to be able to say, “I’m buying a home and look at what else it’s doing for me. Look at what it’s doing for me, my family. Look at what it’s doing for the environment. I’m not hurting anything by going this direction.”
Dean Wehrli:
Do you think that’ll play out in all regions equally though? I mean, we don’t want to put too fine a point on it, but in Colorado, in California, some other places, yes. Do you think that’s going to happen in Tennessee and Texas?
Sidney Pell:
I think you’re seeing a definite shift towards it. You do have to be conscious of the regional and even the local market differences because I think about the fact that I’m from Tennessee, I was born and raised in Nashville where social environmental consciousness is important, but it’s not at the forefront of a lot of decision makings, especially whenever you’re thinking about making a big purchase decision like a home.
Sidney Pell:
Now, I lived in Knoxville, which is far East Tennessee for the past several years before I moved out to California and I can tell you that particular region of Tennessee is far more environmentally conscious than middle Tennessee. So, having sustainability and making sure that the environment is taken care of is really important. Much more important I would think there than it was in Nashville. Not that it’s not important, it’s just more prevalent in some markets.
Dean Wehrli:
Yeah. So, you really need to know your submarket and even finer than that in some cases.
Sidney Pell:
Oh, absolutely. You do need to be aware of that. And you definitely don’t want to go to … I’m trying to think about the most congested city I’ve ever been. I think New York city, obviously. It’s going to be really hard to try to say, “Hey, look what I’m doing that’s different and it’s saving the environment” because this is a really congested place and you might get drowned out by all the other noise.
Dean Wehrli:
Yeah. I don’t know if it’s a myth or not. Well, it’s not a myth, but the millennials are very tech dependent, very technology oriented. Does it go deeper than that though, when it comes to home buying?
Sidney Pell:
Oh, absolutely. Let me tell you about millennials and technology. They are reliant on technology. This particular group of shoppers, millennials, they are researchers by nature. More than anything else, they want to be able to go online and find out the answers to any questions they have. To them, technology is part of life and to actually have a home that includes technology or incorporates that, that makes their life easier. Whether it’s something like a smart fridge or even a smart garage or keyless entry, things like that that just make life easier.
Sidney Pell:
Those are going to resonate really strongly with this particular group. So, for millennials, people who are born in the 80s, they’re 44% more likely to buy a product with the latest tech than their parents who were born in the 50s. So, you think about the prevalence of Alexa and Siri. This is just a part of their life.
Dean Wehrli:
Well, okay, but is their personal relationship going to be with their digital assistant or with real people when it comes to home buying specifically? Are they still reaching out? Is it friends? Is it realtors? Is it family? Who are they looking for or are they looking for personal relationships in the home space?
Sidney Pell:
Well, they’re looking at personal relationships through two different lenses. So, when it actually comes to buying a home, they want that personal connection. So, think about the fact that there’s so much information that’s available online, but they also want that personal connection with a person.
Sidney Pell:
So, we found, according to our study, that nearly half of our millennials plan on using a realtor for the home buying process. So, just because they’re going to your website and looking up information or finding information online somewhere doesn’t mean that they don’t want somebody to help them in person. That’s really important, especially when it comes to making big purchases. Remember, we’re going back to a group of shoppers who are really big on experience and they want to make sure that they have that comfort. They have that validation from somebody that actually knows about the process.
Dean Wehrli:
Oh, well that’s interesting because it’s not just asking Kev because Kev’s his bro and sorry, my picture of millennials comes entirely from the movie Neighbors, but it’s not that. They are looking for professionals who know what they’re doing and they’re going to take that relationship seriously?
Sidney Pell:
Yeah, absolutely. And I think too, whenever you’re thinking about the fact that they’re going online and they’re looking for all of this information, focus on what’s going on online. So, for example, if another builder has a better online presence, you’re going to lose sales. And they expect a great mobile experience and they’re more likely to purchase from somebody who gives them that great mobile experience, but we need to make it as tangible as possible. That’s why they want somebody that knows about the process to help them and really when you’re thinking about your digital and online presence, make it consumer centric, make it millennial centric, if that’s who you’re trying to reach because you have to stop and think about what’s more important to this buyer. Is it your brand or is it the home they’re actually buying? And I can tell you the answer is the actual home.
Dean Wehrli:
I mean, we’ve talked a lot about, is there any other major consideration in terms of this idea that they feel entitled, is it really just that they are very value oriented? Are they very hardheaded about this purchase?
Sidney Pell:
I think when you’re talking about millennial buyers, value is at the core of most millennial purchases. It doesn’t matter what category, small or big, value is the driving factor. JD power did this incredible consumer insight study on millennials and what they found was that value for money is king. That is the end all and the be all. Unlike these other generations who tend to buy things because of the status it brings them or just blind brand loyalty, millennials are the most likely to make their purchase decision based on the value for their money. When you think about our national study that we did, again going back to that idea that these millennials are twice as likely to purchase something that has the latest technology that gives them good value for the money, that enhances their life, it helps their health, it makes things easier, more convenient, you’re less likely to care about the brand so much as what they’re getting for their money. And it’s all about, again, just going back to that lifestyle convenience and the benefits that the purchase has to give them.
Dean Wehrli:
Okay. Let’s talk about then some ways in which millennial home buyers compare and contrast with their parents. How are they different from their parents or maybe in some ways not different from their parents? I mean, go for it. What are some ways that we should be educated about how they are different or not different from their previous generations?
Sidney Pell:
I think when it comes to the actual home itself, think about the kind of home they want to buy. Really want efficiency. They want a smart floor plan, something that’s open. They want that seamless indoor, outdoor living. Something they can entertain in and comfort and ease. Obviously, everybody wants a little more space than what they have, but again, going back to … they don’t want wasted space. They don’t want this McMansion that’s out there. There’s a lot of tradeoffs that they’re willing to make for smaller space. One of them that’s really important to consider is millennials will trade off a smaller space. They’re three times as likely to consider a smaller lot, if you will, for the home, so long as it reduces their commute time. So, it’s really about location. Location is incredibly important. Their time is really valuable to them, so if you’re a builder and if you have a small product or if you’re building on a small infill project or something like that, you can really target millennials by emphasizing the location of the project that you’re working on and saying, “Hey, 10 minutes away.”
Dean Wehrli:
That’s a huge point. I actually do a lot of work in the Silicon Valley in California and God, that’s just hugely important. They’ll absolutely accept density, quite a bit of density in a home product, if it means they can be relatively close to the mothership and cut down that commute and also be amongst the kind of environment they want to be in. But I will say this though, when they do hit that live stage where they need to have a little more space, they are absolutely willing to go on ridiculous commutes to get that too.
Sidney Pell:
Well, and I think you also have to think about if you’re a builder, a lot of builders I think tend to not really think beyond the gates of the community that they’re building in. But think about the 10-mile radius that’s outside of it and all of the amenities that are there. Think about the experience that those home buyers are going to have within 10 miles outside of the gates of the community.
Dean Wehrli:
Or 50.
Sidney Pell:
Or 50. I mean, exactly to your point. Or even 50. Think about the immediate amenities that are available outside of it and that’s another way to consider positioning whenever they are ready to expand out and get a little bit more space as their families grow, as they naturally do, needing more space.
Dean Wehrli:
But they are having kids, right? I mean, are they starting to now? Millennials are starting to do that life stage thing, kids, family. That the previous generations did a little younger. Is that fair?
Sidney Pell:
I think that’s a misconception to a degree. More than half of millennials right now have kids. 22% of millennials will have kids by the time they’re 22 and 70% have kids by the time they’re 39. So, you look at the two ends of the millennial spectrum, they’ve got kids. So, that’s something else to consider too. That also leads to the desire for a home that’s really practical. Function is really important. Style and color are less important than quality and functionality. So, when they’re looking at that new home, they’re literally envisioning “What is my life going to be like every day when I wake up?” If I’m married and I have kids, I’m going to say, “Where are my kids going to eat breakfast? Where are they going to go over and play when they get home from school?”
Dean Wehrli:
At the end of the day though, I mean, still the typical millennial home buyer is going to be dual income, maybe married, maybe not and well educated, and that’s more or less like their parents, isn’t it?
Sidney Pell:
I think so. I do. I think that it’s one of those things where you do have to say that there’s really not a huge … people like to draw this line and say, “Gosh, these guys are so different” or “We weren’t like that.” But, in all honesty, it’s not so different. It’s just happening a little bit later down the line. They’re just a little bit older. They do have more education. They put a higher value on that education and that starts the waterfall of student debt and financial responsibility and wanting to make sure they’re making this right decision. But really, in all honesty when it comes down to with millennials is it’s all about lifestyle design, the expectation that things should be easy in today’s day and age and the fact is that if builders don’t offer this, somebody else will.
Sidney Pell:
These buyers have no problem switching to somebody else in a heartbeat that will give them what they want and what their expectations are.
Dean Wehrli:
So, stay on your toes builders, when it comes to the millennial buyer or you’ll get passed up?
Sidney Pell:
Absolutely. And here’s the thing too. Stop pretending like millennials don’t think about money. Stop pretending like the recession didn’t happen. These guys are really frugal. You really just have to reach out and make them comfortable about the process and embrace the fact that yes, they’re going to go online and get information, but they’re also going to have realtors. They’re going to check out reviews. They’re going to check with other people. They place a lot of value on people and that’s what’s important.
Dean Wehrli:
So, they’re going to tell their friends, but they’re also going to Yelp?
Sidney Pell:
Exactly. They’re going to check you out on Google reviews and let me tell you that’s incredibly important.
Dean Wehrli:
Are they going to Instagram?
Sidney Pell:
That might be like a design inspiration kind of thing. But, in all reality, they really want to find out how you have treated other people like them. And if you think that they’re not looking up your name, then you’re crazy. I think it’s really important to have that online presence. Just to have your reviews online and show that “We are taking care of people like you and we can and we will do it for you too.”
Dean Wehrli:
So, in a lot of ways it sounds like it’s a lot of the same, just in different ways, different media, different modes. Reviews used to be in the newspaper ad. They’d have the testimonials and now they have it online and it’s in Google and things like that, but it’s still the same basic idea, isn’t it?
Sidney Pell:
I think so. I think the one thing that does set them apart, millennials, from everyone else is that it’s all about the experience. And you have to be cognizant of the experience that you’re offering them. You have to give them a good experience from beginning to end. That’s what really sets them apart. If you create that experience for them, then even better. That’s what sets you apart from everyone else.
Dean Wehrli:
Awesome. Well thank you, Sidney. That was our shot at millennial miss myth-busting without explosions. Science, yes, but consumer science. Not chemicals. Hope you enjoyed that. Sidney, please say bye to the folks.
Sidney Pell:
Bye. Thank you so much, Dean.
Dean Wehrli:
Thank you. This is Dean Wehrli. I’m your host at New Home Insights. Please listen in next time.
