s the largest age group of homebuyers, millennials are changing the face of America’s communities.
What are the factors driving their home buying?
Financial considerations rank high. That’s not surprising given that almost half of millennial buyers have student loan debt, according to the National Association of Realtors®’ 2017 Home Buyer and Seller Generational Trends Survey. But that debt certainly isn’t stopping some of them from entering the housing market in full force. Rather, they tend to see buying a home as a way to grow their nest egg.
"Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment," said NAR Chief Economist Lawrence Yun.
While debt may not be holding them back from entering the housing market, it is prompting them to consider more affordable neighborhoods.
Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment.
Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of Realtors®
Unfortunately, meager housing supply is putting pressure on their search for affordable homes. According to a news release from NAR in July 2017, total housing inventory nationwide measured year-over-year has fallen each month for over two years.
“Millennials now have children,” said Jessica Lautz, managing director of survey research and communications at NAR. “You start thinking of where you want to be for the best schools. They want a place that is walkable and where they can bring their strollers and dog.”
Given these supply challenges and need for space at an affordable price, just where are they moving? The answer is “surban” areas, 18-hour cities, Midwestern cities and more sustainable neighborhoods.
“[It’s] a way to link affordability with desirability,” said Yun about these six major trends. Read more about how these are giving rise to new ways of living.
Surban is the new suburban
As they grow their families, millennials are leaving bright lights behind. Last year only 15 percent bought in an urban area, down from 17 percent the previous year and 21 percent two years ago, according to NAR’s generational survey. But they’re not embracing the strip malls and highways of their childhood suburbs. Rather, millennials are choosing so-called surban areas, or those with a mix of suburban and urban features.
These more affordable communities typically boast pedestrian-friendly retail areas, quick access to open green spaces and popular public schools.
“Millennials are seeking housing in suburban areas because the properties are usually in better condition and priced better,” said Kathryn Bishop, a real estate agent with Keller Williams in Studio City, Calif., and a Realtor®—a member of the National Association of Realtors®. “That leaves them money to enjoy entertainment like good restaurants and first-run movies.”
Rise of the 18-hour city
Kansas City, Mo. is answering home buying challenges by evolving into a place millennials want to call home. That’s in part thanks to more than $5 billion in public and private money that has been invested in the area in the last five years, resulting in mixed-use development that is attractive to both residents and businesses. Kansas City is one of a host of so-called “18-hour cities” attracting millennials across the country by remaining lively all day and into the night and enjoying below-average unemployment rates, a combination that offers homebuyers an appealing place to grow their careers.
“Jobs are being created by companies that are based in more expensive parts of the country like San Francisco,” said Yun, referring to the typically low unemployment rates in 18-hour cities like Charleston, S.C. and Boston. “As they expand—it could be data centers, call centers—they are seeking out more affordable land and where they can attract young employees.”
Lower-than-average housing costs and healthy job opportunities abound in many Midwestern cities such as Madison, Wis. and Omaha, Neb. where unemployment rates of 2-3 percent are well below the 4.3 percent national average.
“The biggest attraction in the Midwest are the price points,” said Yun. “On the coasts, starter homes may be half-a-million dollars to a million dollars. These homes are out of the millennials’ budget. In response people are saying ‘what about Des Moines or Minneapolis?’ They offer much more affordable and attractive housing options.”
Midwest cities also happen to be home to several colleges and universities.
“With a college town you are always going to have something to do,” said Lautz. “You’re always going to have an athletic event to attend, a play or something of the arts to go to. You are going to have all that on a much more affordable scale near a university.”
In addition to community characteristics like these, millennials also are demanding specific, energy-efficient amenities inside and outside their home.
“There is an attractiveness to energy-efficiency,” said Lautz. “If you can reduce your heating and cooling costs, that is going to be very attractive in an economy where you have such high home prices. It’s the mindset of wanting to help the environment; not only do you feel good about it but you are saving money as well.”
A shiny and new Rust Belt
Pittsburgh, Pa. is a city in full renaissance—it’s one of several former Rust Belt cities that, due to the influx of industry and tech companies, suddenly have a new life. In the broad swath between Buffalo and Omaha, cities that once relied on heavy manufacturing are now attracting millennials who are drawn to the diversity of the cities’ urban cores, the value of their real estate and the relatively reasonable cost of living.
With its green spaces, historic architecture, affordable housing stock, arts community and vibrant nightlife, Pittsburgh is a shining example of this trend. The city attracts engineers graduating from Carnegie Mellon and other area colleges, and a number of big tech companies recently opened offices there.
The next tech hub
Gone are the days when landing a cool tech job meant packing up and moving to Silicon Valley. The tech industry has officially gone national, meaning techies with all different types of lifestyle preferences can find somewhere to call home.
Austin, Tx. is quickly becoming known the Silicon Valley of the south with companies like Amazon, Google and Facebook operating offices there–plus, the city ranks as one of the most affordable, if the culinary scene alone wasn’t enough to draw in new talent.
But finding that affordable, sustainable family home in a rising surban neighborhood isn’t easy. And negotiating the best deal in a competitive housing market is even harder. As these trends drive different patterns of home buying and give rise to new types of neighborhoods, a remaining constant is the value of expertise offered by a real estate agent to navigate the ever-evolving housing landscape.