Millennials are gaining homebuying market share each year. The largest living generation is aging into prime homeownership years and will drive the housing market going forward so sifted through the cohort’s preferences to identify the ten most desirable markets.
Setting The Stage
The actual definition of a Millennial varies by source. For our purposes, we are looking at those born between 1980 and 2000. Right now, the largest share of Millennials is just under 30 years old, contributing to the demographic wave that is still in the early stages. For example, the latest data from the U.S. Census Bureau shows:
The homeownership rate for those under 35 was 36.5% in 4Q18, up from last year, but far below the 39.1% historical average.
The homeownership rate for those 35-44 (including both Millennials and Generation X) ticked up to 61.1% in the fourth quarter but again is off by a high margin compared to the 64.9% historical average.
With the depressed but increasing homeownership rate, Millennials are critical to understand. To help provide answers, we conducted our third annual Millennial survey in January. The national survey’s focus is on the everyday Millennial regardless of their living situation (own, rent, live with parents, dorm, etc).
Checking The Boxes
This year, we added a new question to our survey: Have you seriously considered moving out of your current city? If yes, to where and why? Much to our surprise, nearly 60% of our respondents said yes. Of those respondents:
The younger Millennials are more flexible. 70% of Millennials aged 19-24 have seriously considered moving compared to 45% of those 35 to 39.
Owning a home is a deterrent. 60% of renters are open to moving compared to 40% for existing homeowners. For reference, Millennials make up a large share of closed loan applications in Baltimore, Houston, Chicago, Minneapolis, and Nashville, according to Ellie Mae.
Expensive markets rank high. Denver, Portland, Seattle, Washington, DC, and New York City were the top five desired locations. Those considering Denver, Portland, and Seattle were already located in the West. The desire to move to Washington, DC and New York City came from outside the Northeast.
Regardless of the city of origin, the driving factors to move included job opportunities (30% of respondents), affordability (20%), and lifestyle (12%). Using this information, we created an index to capture the markets most poised for Millennial success. See the map below and the index details at the bottom of this article.
Texas dominates top spots. Dallas and Houston ranked extremely well for quality of life, cost of living, and overall employment opportunities, propelling the markets to #1 and #2, respectively. Austin, a far smaller metro, rounds out the top three, with a heavier focus on relative housing affordability and the fun factor.
Phoenix lands at #4. The labor market helped and hurt Phoenix with strong employment opportunities but modest salaries. The lower than average Millennial wages are partially offset by a favorable cost of living. The fun factor pulled Phoenix lower than Austin.
Two factors drive Orlando to #5. Employment opportunities in Orlando, while concentrated in a few sectors, are plentiful with 4.0% job growth YOY. Like Phoenix, Orlando’s score was dinged by very low Millennial salaries, but the cost of living helps mitigate some of the effects. For example, 85% of total new housing units planned had a minimum price below the local FHA loan limit of $314,827, according to Zonda.
Lower than you’d think. While highly recognized as a Millennial hotbed, Denver’s desirability was pushed down by affordability factors but remains attractive from a quality of life standpoint and lands at #6 on our list.
Our index data overlaps with three of the top five desired markets highlighted by Millennials in our survey (Denver, Washington, DC, and Seattle). While affordability is certainly a factor in considering where to live, job opportunities, or at least perceived job opportunities, play a higher role.
Contact us to discuss how we can help your firm appeal to the Millennial homebuyers.
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