Millennials and McMansions: Are they compatible?
As the housing industry continues to rebound from the depths of the recession, a potential problem lurks: the question of where and what kind of home will remain popular with a buying public increasingly skewing younger.
While some headlines suggest younger professionals are not even looking to buy homes, such as one in the Washington Post that reads “Millennials aren’t buying homes. Good for them,” locally that’s not the case. Activity in the real estate market is up in virtually all demographics.
But another question focused on younger buyers is whether the under-35 buyers – the so-called millennials – are interested in purchasing large luxury homes. The McMansions which dot the shorelines of Grand Traverse Bay, Glen Lake, Crystal Lake and the like have long been seen as the most desirable properties. But homeowners buying and building above their means in an era of easy money and low interest rates is exactly what helped lead the industry to its large correction, i.e. the bursting of the real estate bubble.
Area professionals suggest the reality here is…complicated. Buyers, whether they Millennials, Boomers, or somewhere in between, are once again feeling confident enough to buy homes in the area. But where they are may be much more important than how big they are. Bryan Olshove of Coldwell Banker Schmidt Realtors argues that younger buyers are not looking at homes the same way their parents did.
“It isn’t as vogue to own a 5,000 square-foot home as it was in the ’90s,” he said. “That style of living is not as popular with younger buyers.”
But other Realtors say younger buyers of means are not averse to big homes. John Martin, who heads the eponymous firm The Martin Company in Glen Arbor, said he still sells large homes on Glen Lake to buyers of all ages.
“Some of the really expensive places on Glen Lake really are younger buyers. They have the means and desire. It’s not just old guys,” he said.
What they really want, however, is to be where the action is, not sequestered in a huge home far from amenities like shopping and restaurants.
“Everybody wants to be downtown,” said Perry Pentiuk, president of Venture Properties.
It’s not just downtown Traverse City, either. More and more prospective purchasers want to be in close proximity to the Suttons Bays, Glen Arbors, and Lelands.
“They sure like to be near the villages. People like to park their car and walk,” said Martin.
That sentiment is echoed by agents across the area.
“Big isn’t as important as location,” said Jenn Frankhouse of RE/MAX Bayshore in Traverse City. The daughter of longtime Realtor Matt Dakoske is a millennial selling to millennials. “A lot (of younger buyers) want to be downtown or close to downtown.”
She pointed to herself as a prime example. “My husband and I just bought on East Front by the college. We can still bike to downtown, walk to the beach, run out to the peninsula.”
She said as people move to the area, they are happy to be near the water, not necessarily on it.
“They care about the number of bedrooms and want an updated bath and kitchen. But it’s not always about the size. It’s finishes and location. They’re always within five minutes of the water.”
That dovetails with Olshove’s observations.
“You can find a well-executed, 3,600 square-foot home that has everything,” he said, noting that smaller homes mean the costs for both maintenance and any updating will be less onerous as well.
Weston Buchan, a Realtor with Coldwell Banker Schmidt Realtors, believes younger purchasers are making sure they can make ends meet after seeing what happened with the foreclosure epidemic during the recession.
“I think millennials are taking a more cautious approach,” said Buchan, himself a millennial. “They are pre-approved for X amount of money, but don’t want to spend it. They want to live within their means.”
Others it’s not just millennials, it’s the McMansions themselves that are not attracting buyers. Lynne Moon, who boasts 40 years in the industry, said this is a most unusual year.
“There’s a lot of demand, (but) they want a brand new home. It’s a very picky high-end buyer.”
Pentiuk might beg to differ. In addition to luxury condo units in Traverse City, he sold several high-end properties this year.
“I sold a bunch of $1 million to $1.3 million properties. From $800,000 to $1.6 million is really hot. It’s a good market,” he said. “Right now there’s still a ton of inventory.”
That inventory may be the problem going forward. As owners age and become empty-nesters, they typically look to downsize and relocate to a more central location. Olshove believes homeowners are looking to do just that at an earlier age.
“Sellers are exiting (their home) at a younger age, when their kids are 20, not 30,” he said.
If there is a lack of potential buyers interested in paying top dollar for and maintaining those enormous houses, there may be a large change in the price those massive luxury homes can command. That’s particularly true if those McMansions are not close to the restaurants, shops and other desirable aspects of a downtown area.