Phoenix Real Estate Trends: How Baby Boomers and Millennials Are Reshaping the Market

The Phoenix real estate market is undergoing a significant transformation driven by two influential demographic groups: Baby Boomers and Millennials. As these groups navigate the new Phoenix housing market trends, their distinct preferences and economic positions are profoundly reshaping the market. Below, we examine the specific preferences of each group, how Phoenix real estate trends influence property prices, the types of homes in demand, and the implications for sellers and developers in the region.

Baby Boomers: Dominance in Homeownership

Born between 1946 and 1964, Baby Boomers own a substantial portion of the housing market. Many Boomers own their homes outright or enjoy historically low mortgage rates, making them less inclined to sell. This demographic's tendency to age in place means they retain relatively large, family-sized homes that might otherwise be available to younger buyers. In Phoenix, about a quarter of homes with three or more bedrooms are owned by Baby Boomers.

Downsizing and Luxury

Despite many choosing to stay put, some Boomers are choosing to downsize, often to luxury condominiums, smaller, more manageable homes, or even apartments. However, many of them are staying put, so the pool is small and the homes that are being listed will likely not hit the market simultaneously. Rather, new listings are more likely to be listed gradually, with minimal short-term impact in alleviating the lack of supply in some areas.

Preferences and Renovations

When it comes to home features, Baby Boomer’s real estate prioritizes accessibility and convenience. Compared to Millennials, they are less likely to undertake significant renovations, but they do appreciate updated kitchens and functional layouts. Open floor plans are particularly appealing, facilitating easy movement and social interaction.

Millennial Home Buyers in Phoenix: The New Majority?

Millennials, now the largest group of homebuyers, are transforming Phoenix housing market trends with their preference for tech-ready homes and urban amenities. This generation, born between 1981 and 1996, values proximity to work, public transportation, and vibrant social scenes. Their demand is driving up prices in urban areas and influencing the development of smart homes equipped with the latest home technology.

First-time Buyers and Remodeling Enthusiasts

Millennials lead the charge among first-time homebuyers. According to a report from the National Association of Realtors (NAR), first-time homebuyer's average age in 2023 was 35 years old, the prime buying age of Millennials. A strong inclination towards remodeling has also proven to be a trademark of Millennial's real estate investment. They spend significantly more on home projects annually than Baby Boomers and will undertake more annual projects than Boomers or Gen Xers. Popular upgrades include modern kitchens and aesthetic improvements that enhance curb appeal.

Design Preferences

A notable difference between Millennials and Boomers lies in design preferences. Millennials lean towards vintage aesthetics, original features, and contrasting color palettes, while Boomers prefer more traditional and neutral designs. More than anything, however, Millennials tend to be minimalists. They appreciate clean lines and an, at times, stark aesthetic, with the occasional pop of color or an unusually bold accent — features that are in abundance in many of Phoenix's high-end homes. That said, one specific preference remains universal across all current home buying generations — Boomers, Gen X, Millennials, and Gen Y — a functional home layout.

Impact on Property Prices and Home Types

Although Millennials are making inroads, the Phoenix real estate market remains in the hands of Baby Boomers. The area is an ideal landing for those wanting to age in place, and the reluctance of Baby Boomers to sell their homes contributes to inventory constraints, exacerbating the housing shortage in Phoenix. This scarcity and high demand from Millennials are driving up property prices. Homes that come onto the market attract competitive offers, especially from Boomers who can leverage home equity to outbid younger buyers.

New Construction and Incentives

As mentioned earlier, Boomers are slowly moving on from their single-family homes as their properties become too much for them to care for. For Millennials, the pace may be slower than they would like, which sees them turning more and more to new construction, skirting the lack of inventory. Developers in Phoenix are responding by building homes that cater to the preferences of both Boomers and Millennials. Though Boomers remain a buying force with a large contingent between the ages of 60 and 70, perks such as mortgage-rate buydowns attract younger families to these new developments. It's working, too, as new home pending sales were up by 34.6% year over year in Phoenix at the end of March, 2024.

Implications for Sellers and Developers

Understanding the distinct preferences of Boomers and Millennials is crucial for sellers. Tailoring home features and marketing strategies can enhance a property's attractiveness to appeal to these groups. For example, highlighting accessibility features for Boomers or showcasing smart home technology for Millennials may have a favorable impact.

Developers in Phoenix are increasingly focusing on mixed-use developments that combine residential units with retail and entertainment options. These projects cater to the urban-centric lifestyle favored by Millennials while offering the amenities and convenience desired by downsizing Boomers.

Future Outlook

Looking ahead, the gradual downsizing of Baby Boomers will slowly increase the housing inventory, potentially easing some of the current market pressures. However, the demand for diverse housing options will remain strong with the ongoing influx of Millennial buyers and their evolving needs. Developers and sellers who can anticipate and adapt the trends are well-positioned to thrive in Phoenix's real estate market.

Explore the Phoenix Real Estate Market with a Trusted Partner

The Phoenix real estate market is at a crossroads, shaped by the dynamic interplay between Baby Boomers and Millennials. Each group brings unique preferences and economic considerations that influence Phoenix real estate trends. For sellers and developers, staying attuned to these demographic shifts and their implications is key to navigating the evolving landscape and seizing opportunities in this vibrant market.

If you're looking to buy or sell and ready to explore the best of Phoenix's luxury real estate market and need a trusted partner to help facilitate your next transaction, contact The Santistevan Group today. Allow our team's years of experience and expertise to help you navigate your luxury real estate journey.

_{*Header image courtesy of The Santistevan Group}