The millennial age is considered those who were born between 1980 and 2000. This generation has a significant pull, not only on the real estate market, but on the overall economy. Their preferences and opinions tend to shape our society, which is why they’re considered the most influential generation today.
For the past several years, most market analyzers were under the notion that the millennial age has an unwavering love for cities. First-time home buyers had hit an all time low since 1987, 32% of all purchasers in 2015, which might suggest that the millennial age was reluctant to move to the suburbs. The decrease we saw in first-time home buyers made the market more challenging for the older generations. Without the millennial age on the housing market, current home owners were finding it difficult to sell their property after retirement, which makes for an unhealthy market.
Fortunately, it seems as though that “urban boom” we were experiencing was simply a phase. In an earlier blog of mine, I discussed the reasoning behind the decrease in first-time home buyers. Student loans are a significant part of the equation here. Loans are substantially higher than they once were, and in conjunction with the rising rents, it leaves millennials unable to save for a down payment. There’s also a change in culture. People are more likely to get married at an older age than they once were. According to statistics from Pew Research Center, the median age for a man’s first marriage was 23 back in 1960, as of 2010, it was nearly 29. The millennial age, being at a median age of 25 as of 2015, are just now beginning to contemplate starting a family in the years ahead. Thus, as they grow older, and closer to today’s common age for marriage, there will be more buyers joining the market.
Another contributing factor is the job market. As the unemployment rate decreases, more millennials are finding stable careers, with substantial pay. The Great Recession made it difficult for the millennial age to land a job with a sufficient income to withstand loans and rent. Now, with the job market improving, millennials are becoming more successful in their careers with age, and beginning to look at their future.
These theories have been reflected in a number of articles as of late. In a recent piece for fortune.com, author David Z. Morris, suggests that millennials don’t love the urban lifestyle as much as we had previously thought, “They’ve just been stuck there longer, pining for the suburbs all the while.”
Census data, featured in The Wall Street Journal, concludes that from 2004 to 2007 an average of 50,000 adults aged 25 to 34 left both the New York and Los Angeles metro areas annually, after the recession, that number dropped by about 80%. Urban areas, like New York or Los Angeles, have a certain appeal to young adults just finishing school. Whether they’re looking for jobs or a ‘fun’ lifestyle, those areas covered all the bases. William Frey, a demographer at the Brookings Institution, also suggests that those millennials, who fled to urban areas, may have been stuck in the city rather than choosing to live there.
As the economy has steadily been climbing their way out of The Great Recession, the millennial age seems to have found their footing. To further attest to these theories, urban planning professor at USC. Myers, Dowell Myers, recently pointed out that “the largest cohort born in any one year” those born in 1990, turned 25 last year. Myers suggests that those “Peak Millennials” will “start returning urban / suburban living patterns to their historical norms”. He goes on to reflect on the urban boom, which was a result of an increase in millennial presence, not preference.
These next few years will have a great impact on the economic fate of cities. We’re seeing development in a great deal of secondary cities, which leaves young people with more options for opportunities. Furthermore, as these cities become more accessible, citydwellers have the ability to live elsewhere, have more space, and simply commute. While young people will continue to flock to prominent cities, it might be at a slower rate. As increasingly more millennials pack up and ship out, urban areas might just be grappling to maintain their vibrance.
Check back for more blogs on the real estate market from Tyler Sheff!