Millennials are getting older. And as they enter the next stage of life - marriage, kids, higher salaries - they are beginning to leave cities, just like the generations before them.
Millennials’ share of mortgage originations could surpass an unprecedented 50% in the spring of 2020, more than that of Generation X and baby boomers combined.
Once marked by ambivalence, the millennials’ largest age bracket turns 30 in 2020. Financial and family needs may push them to search for new homes.
In the early 2010s, slumping home sales among younger adults led many real estate analysts to conclude that the entire generation was rejecting typical American values in pursuit of a more urban lifestyle.
Turns out that certain social and economic factors had simply influenced millions of Millennials to delay settling down. And even as they begin to pursue home ownership, many do want to stay downtown, close to jobs and amenities. But in this era of urban revitalization, it’s increasingly difficult to afford.
Condominiums and townhouses are a more affordable option, but that doesn’t work for everyone, particularly those who want families. Dog owners and auto enthusiasts also blanch at smaller living spaces.
As home prices increase, people, especially young people, are inclined to “drive until they qualify,” for the kinds of homes they want, rather than settling for something they don’t.
A 2018 survey of 1,200 adults younger than 36 showed more of them are buying homes in the suburbs than in cities. Home buyers pay on average 26.5% of their income each month for a median-value home in a city, compared to 20.2% for a similar home in the suburbs.
According to recent Census figures, cities with more than a half million people collectively lost almost 27,000 residents age 25 to 39 in 2018. That may not seem like much at first glance, but it’s reflective of a longstanding trend.
Millennial migration into the suburbs is changing development. From organic markets to entertainment venues, New Urbanism is bringing more variety, mixed use spaces, and public transportation options to suburban residents. More and more suburbs are starting to feel like small cities, without the higher price tag.
Accordingly, single-home builders are applying for permits to build houses in the “exurbs” more than any other area of the country, another sign of how the housing affordability crunch is driving consumer and industry decisions.
Exurbs were the only region of the country that had net year-over-year growth in single-family permits in the first quarter of 2019.
As more millennials buy houses, that trend will likely continue.