MILLENNIALS MAKE THEIR MARK

illennials are entering the home-buying market en masse, shedding their title of the “renter generation” as they reach new life milestones, with 4.8 million millennials turning 30 in 2021. And they’re increasingly relying on wealth transfers, according to real estate agents.

“Most millennials are utilizing a transfer of wealth from their parents, grandparents, or a relative to purchase property. And even when parents are buying, their millennial kids are often the ones making the decisions because it’ll be theirs one day,” says Jonathan Spears, agent, Scenic Sotheby’s International Realty, based in Destin, Florida.

Nearly US$70 trillion will be passed down from older generations between 2018 and 2042, according to data from market-research firm Cerulli Associates, and more millennials continue to use their share for real estate, with home showings becoming more of a family affair.

Spears says baby boomer–aged buyers are bringing their millennial kids to showings and having them ultimately make the purchasing decision. They factor in attractive features such as developments that include community pools, tennis courts, and other amenities fit for remote-work life, in addition to proximity to towns and entertainment.

The number of young adults aged 25 to 34 purchasing homes with a co-borrower aged 55 and up has increased since 1994, according to a survey from Freddie Mac’s portfolio of purchase loans. While 1.3% of young adult first-time home buyers listed adults over 55 as co-borrowers in 1994, that number increased to 3.2% in 2018.

More than 33,000 millennial residents moved to Texas; Colorado saw more than 29,500 new millennial residents; and Washington state saw more than 25,000 in 2019, according to the most recently available migration data from the U.S. Census Bureau analyzed by SmartAsset. Arizona saw more than 20,000, while Florida had around 14,000 millennial residents move to the state, the same data shows. North Carolina, Ohio, Tennessee, Idaho, and Pennsylvania rounded out the list of top 10 places where millennials are moving.

“Millennials are making sure they have a great home office and access to amenities, whether it’s a private pool at the house or in the community, a clubhouse, or tennis court,” Spears says. “We have also found that affluent millennials are choosing to reside in the more established communities that promote new urbanism and conve­nience to world-class amenities including restaurants, shopping, and boutique grocery stores.”

In his particular market, there’s been a demand in Walton County, Florida’s WaterSound property development, Seaside, and Rosemary Beach neighborhoods, he says.

The National Association of Realtors’ 2021 Home Buyers and Sellers report found that buyers aged 22 to 30 were most likely to purchase a new home for the community’s amenities.

“Most millennials don’t want to do work on a property to avoid dealing with the challenges of getting permits, paired with the mentality that they’re too busy working and value time with friends over remodeling or taking on a big project,” says Greg Fulford, luxury real estate agent, Sotheby’s International Realty–San Francisco Brokerage.

hree letters are changing how today’s investors view their capital opportunities—ESG. A fresh range of more socially conscious investment options, whether in real estate or other realms, has the potential to benefit the larger community while expanding investors’ portfolios.

The developing world of ESG investment (which stands for environmental, social, and governance) demands analysis not only of risk and growth potential, but also ecological or societal impact. The concept allows for material gain as with any other bankable arrangement, while offering a chance to benefit the community beyond accounting.

Jon Hale, Ph.D. and CFA, is head of sustainability research for the Americas at Morningstar. When using the term ESG, he’s referring to investments in public markets, such as stocks and bonds, often invested via mutual funds and ETFs. In the real estate class, most ESG investment options involve sustainability or affordable housing.

“Real estate investment trusts [REITs] are companies holding portfolios of buildings that are publicly traded, like stocks,” Hale says. “So, yes—there are real estate funds that focus on REITs that have green attributes. Also, sustainable funds in the U.S. often seek out affordable- housing bonds that finance those projects, or those backed by mortgages on affordable homes.”

Hale stresses that anyone with money to grow can add a sustainability lens to their investments.

When it comes to real estate, new-home buyers can make their property purchase or development selections based on their environmental concerns. Kevin McDonald, sales associate, Sotheby’s International Realty-Wine Country Brokerage, represents buyers and sellers in northern Sonoma and southern Mendocino counties, and finds ESG-aware buyers bringing their environmental preferences to the buying or construction processes.

“They want to know what impact a property has on the land and resources,” McDonald says. “Does the home have sustainable features? Is it on or off the grid? What’s the solar-power capability?”

In his wine-country surroundings, McDonald finds a growing collection of turnkey properties with sustainable features. That selection makes it easier for buyers to invest in such homes without the challenges of making their own eco-conscious renovations.

Across the hemisphere, Jonathan Sparrow, sales partner, Cayman Islands Sotheby’s International Realty, believes the vast majority of buyers investing in Cayman properties have some personal affiliation with the islands. That makes for some specific ESG decision-making with the potential for personal and social impact.

According to Sparrow, the Cayman Islands has seen a significant number of homes built in the last five to 10 years offering a strong focus on environmental impact, conservation, and ecology.

“Private homeowners and resort developers are willingly investing additional money to lessen ecological impact,” he says. “A great example is turtle-friendly lighting that doesn’t disorient new hatchlings [by] drawing them away from the water’s edge when their natural inclination is to follow the moonlight into the ocean.”

Sparrow highlighted a recent record home sale as a convergence of sustainability and investment success. The Sea of Dreams in Pease Bay was a record sale in 2021 and included a 10,000-gallon rainwater cistern to service one of the largest residential swimming pools on the island.

“Solar power is a natural staple for Caribbean homes—providing clean energy,” Sparrow adds. “Construction methods and materials are utilized throughout our homes for maximum efficiency and reduced fuel consumption.”

With younger generations more committed to sustainability than their older counterparts, the trend toward sustainable investments is likely to increase around the world, Hale says, and those same younger investors “have more sustainable investment funds to choose from than ever before.”

Barbu says the seller may consider other forms of cryptocurrency, but the preference is bitcoin, since the seller is invested in it already.

In New York City, the seller of a limestone mansion located half a block away from Central Park will accept cryptocurrency. Cathy Taub, senior global real estate advisor, Sotheby’s International Realty–East Side Manhattan Brokerage, represents the seller and said it wouldn’t be the first time her clients have dealt in cryptocurrency.

“Generally, in my experience, sellers who accept crypto think of bitcoin and certain other crypto as digital gold. They have a concern about inflation eating away at their fiat cash,” Taub says. “Given the immense global interest in crypto, there’s no doubt in my mind that it will become increasingly popular as ‘consideration’ for real estate.”

“Under the U.S. tax code, bitcoin is considered property, and so is real estate. It isn’t a cash payment, so it’s a barter where you’re exchanging one type of asset for another type of asset. Both assets have tax rates, so it’s not convenient from a tax perspective,” Dilendorf explains.

Some buyers may also be hesitant to part with their bitcoin—hoping it may go up in value.

“When bitcoin was US$65,000, we were getting a lot of interest from clients who wanted to buy real estate or yachts through crypto,” Dilendorf says. “If bitcoin breaks US$80,000 or US$100,000, I would expect a lot of people to complete these types of transactions.” Early adopters of bitcoin could see that valuation as an excellent time to liquidate and invest in luxury goods or other assets. (In the first three quarters of 2021, bitcoin ranged from US$29,413.29 to US$64,899 per coin.)

A group of researchers at global bank Standard Chartered forecast values will continue to increase, and bitcoin could reach US$100,000 by early 2022. “As a medium of exchange, bitcoin may become the dominant peer-to-peer payment method for the global unbanked in a future cashless world,” Geoffrey Kendrick, head of crypto research, Standard Chartered, said in a statement.

“You can think of this as a title check on a bitcoin. You can see how and where this bitcoin was traded. If the order came from a sanctioned jurisdiction like Iran, it could raise questions,” Dilendorf says. “Naturally, many sellers aren’t equipped to accept bitcoin.”

Thus, Dilendorf says most transactions have involved converting bitcoin into cash to expedite the process of buying real estate, green cards through the EB-5 program, yachts, and art.

Bitcoin and Ethereum, the two most common cryptocurrencies used for luxury purchases, are already regulated with the U.S. Securities and Exchange Commission, and as such, there’s more certainty in terms of regulations, Dilendorf says.

In 2022, more businesses could set up in-house support for cryptocurrency sales, or accept mix-and-match currencies for luxury goods, as buyers and sellers alike become more open to it.

For now, Dilendorf says he asks every real estate agent he works with in New York City why they aren’t listing prices in bitcoin. “It’s a marketing pitch, and if someone wants to pay in bitcoin, it doesn’t cost anything to the seller. Why not price it in bitcoin?” he says.