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Millennials and the Downsizing Problem

David Lykken
May 13, 2016

In the mortgage industry, there has been a generational trend that we've become quite accustomed to. It has become so much a tradition that we consider it to be the natural cycle of homeownership. When a couple has kids, they move into a bigger house. Then, when the kids have grown, they downsize and trade their bigger home for a smaller home. The next generation of couples have kids and take the bigger home. Everyone's happy. But is this trend going to continue going forward?

Millennials, it is often said, have a different set of values than their parents. Many have argued that Millennials aren't interested in homeownership at all. However, I tend to side with those who say that Millennials are simply taking longer to start families and own homes due to economic concerns. While this may be true, it doesn't necessarily mean that Millennials desire homes as big as their parents.

It seems that, while parents of Millennials are downsizing, Millennials who start families are not looking for the bigger homes that are left behind. There is a clear trend in the Millennial generation toward living in smaller spaces. In the future, it is possible that this may lead excess inventory on mid-sized to larger homes. How would we solve this problem?

Chances are, the desire for smaller homes also has some economic influence. If smaller homes become more scarce and bigger homes more plentiful, the economics will probably work itself out. Regardless of their values, Millennials are not likely to buy smaller homes for higher prices than they pay for bigger homes. Like many other issues in the mortgage industry, I think this conundrum will work itself out in time. While Millennials' values may different than their parents, those values are not independent of the economic climate.

David Lykken, a 43-year veteran of the mortgage industry, is president of Transformational Mortgage Solutions (TMS), a management consulting firm that provides transformative business strategies to owners and “C-Level” executives via consulting, executive coaching and various communications strategies. He is a frequent guest on FOX Business News and hosts his own weekly podcast called “Lykken On Lending” heard Monday’s at 1:00 p.m. ET at David’s phone number is (512) 759-0999 and his e-mail is [email protected].


May 13, 2016