Forget the starter home. Today’s first-time buyers want a place they’ll live in for a long time — possibly even into retirement. And this ideal home is most likely in the suburbs.
That’s according to a new Bank of America poll of more than 1,000 adults 18 and older who would like to buy a home in the future. “Folks are waiting to buy their first home until later in life,” said Kathy Cummings, consumer education and consulting executive for Bank of America. And by that point, they’re probably better able to anticipate their future needs, which may be a home in which they can raise their families — places with ample square footage, backyards and sought-after school districts.
People anticipate that buying a home isn’t going to be an easy process, and they’d rather not have to repeat it anytime soon, she added.
The report found 75% of first-time buyers would rather bypass a starter home, even if they’d have to save more to do it. And 35% said they’d want to retire in this home.
Also, despite many reports about the lure of city life over recent years, especially among millennials, the report found that 52% of first-time home buyers want a home in the suburbs. Only 26% said they wanted to live in the city and 22% said they wanted to live in a rural area. A full 75% of first-time home buyers want a single-family home. Other research also confirms the popularity of the suburbs.
Between 2000 and 2014, the share of people living in urban neighborhoods dropped 7%, according to an analysis of Census data by Jed Kolko, an economist and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley. During the same time frame, urban neighborhoods — and especially higher density ones — grew richer, attracting mainly higher-income households without kids.
“People believed that there had been a widespread movement toward cities, but it’s limited to very specific groups,” Kolko said. Specifically, high-income, well-educated young people are spending time living in the cities, either as homeowners or as renters, he said.
Home prices have risen faster in urban areas than suburban ones, another reason why many look to the suburbs, Kolko said. That’s partly because construction hasn’t kept up with demand, and land to build on in the cities is scarcer than in the suburbs. “The supply of housing in urban neighborhoods is limited, and a lot of the low- and middle-income households are getting outbid for urban housing,” he said.
Another analysis from Zillow released early this year found that the average urban home was worth 2% more than the average suburban home. That’s a reversal from as recently as 2013, when the average urban home was worth 1.2% less than the average suburban home. In places like San Francisco and Seattle, that often means higher earners have shorter commutes to downtown, while lower earners live farther away.
The value placed on properties in the cities — with their highly walkable, close-to-work locations — hints at how the suburbs might change in the years ahead, said Zillow Chief Economist Svenja Gudell, in a statement. “[Suburbs will] start to feel more urban as buyers move further from city centers in search of affordable housing in communities that still feel urban,” she said. That means the suburbs could become more walkable, with plentiful amenities, mimicking city life.
Affordability was the top concern for all buyers surveyed by Bank of America: 82% said the cost of a home was a top factor in evaluating a home, followed by 71% who said neighborhood, 60% who said floor plan and 47% who said square footage. And paying down debt was a reason that 43% of Generation X participants (between the ages of 35 and 49) and 32% of millennial participants (between the ages of 18 and 34) said they were waiting to buy a home.
But many first-time buyers are confident they’ll have help. A full 66% of millennials are counting on financial assistance from their parents (or their partner’s parents) to become homeowners — and sometimes on a regular basis.
“What didn’t surprise me is that they would be expecting their parents to help. I think that is traditional,” Cummings said. “A lot of homes are fixer-uppers these days, at least ones that are affordable to typical millennials.” In the survey, 19% of millennials said they expect down payment help from mom and dad, and the same share said they’d get help furnishing their new place.
“What I found surprising is the percentage who expected help with the monthly mortgage payments,” she added. In the survey, 15% of millennials expected their parents to help with their monthly mortgage payments, putting mom and dad on the hook indefinitely.
Of course, this can come with a catch: In the survey, 70% of millennials said their parents would have some say in their purchasing process, ranging from how much they should pay to the exact place to buy.