Millennials are
pouring into these smaller cities and buying homes, by Diana Olick, 5/2/19.
In the majority of the
top 10 millennial markets, the unemployment rate is lower than the national
average and home prices are generally lower.
Based on average
income, millennials in these markets can afford to buy 1 out of 4 homes listed
for sale. In Oklahoma City, they can afford 30%. By comparison, millennials can
afford just 10% of the homes in Dallas, 13% in Boston and barely 2% in San
Diego.
High home prices along with strong demand have today’s youngest
homebuyers moving to smaller cities and that could mean a boom for local
economies and home values in those markets.
For example, Madison, Wisconsin, is a new mecca for millennials,
according to a recent study from the National Association of Realtors, which
ranked the top millennial housing markets based on both their high share of
current young residents and of millennials moving in. Three out of 4 recent
transplants to Madison were millennials and they have mostly stayed in the
area, giving the city an overall high millennial population.
The growth is partly due to a burgeoning tech sector as well as
the growing popularity of the University of Wisconsin with out-of-state
students. Google recently announced it was expanding its Madison offices.
Garrick Rohm, 30, just bought a condominium in Madison. He was
renting but decided that it was time to make a longer-term commitment to the
area.
“I love being able to bike to work. You can get anywhere you need
to go. There’s lots of music venues,” said Rohm.“When you’re walking around
Madison downtown, you see young people all over the place.”
Rohm works for a Zendesk, a software company based in San Francisco, but which opened its
new Midwest hub in Madison last October.
“A lot of the tech companies do pay higher salaries, and I think
that is attracting college graduates to the city,” he said.
Rohm characterized the Madison housing market as affordable but
competitive. He didn’t have any trouble buying his home, but he said he is
seeing more and more buyers come to the table with cash in order to win deals.
Christopher Ziegler, a real estate agent at Redfin, has seen the
makeup of Madison change dramatically in a very short period of time.
“It is surprising to see
this city grow into what it has become, but it’s starting to make more and more
sense just because of all of the tech jobs that we’re offering, the UW campus that
we have, and just the amazing culture,” said Ziegler. “I’ve had an influx of
millennials moving into the area in the past year or so, and it’s because
everything on the coast where they’re currently living, it’s starting to become
more unaffordable.”
Other metro areas that
are seeing millennials multiply: Oklahoma City, Grand Rapids, Michigan, Omaha,
Nebraska, Durham, North Carolina, El Paso, Texas, and Salt Lake City, Utah.
Even some pricey markets like Seattle and Denver are getting an influx.
“As long as supply keeps
up to meet demand, and prevents costs from rising too high and too rapidly,
these identified metro areas are likely to see an uptick in purchases from
millennial homebuyers,” said Lawrence Yun, chief economist at the National
Association of Realtors.
In the majority of the
top 10 millennial markets, the unemployment rate is lower than the national
average, and home prices are generally lower. Based on average income,
millennials in these markets can afford to buy 1 out of 4 homes listed for
sale. In Oklahoma City, they can afford 30%. By comparison, millennials can
afford just 10% of the homes in Dallas, 13% in Boston and barely 2% in San
Diego.
While a large share of
millennials initially move into major metropolitan markets, like New York City,
San Francisco and Boston, they don’t tend to stay and buy homes – putting down
roots for the long term.
“The data show that they
leave,” said Nadia Evangelou, author of the NAR study. “They cannot afford it,
so they probably leave for that reason.”
While a massive wave of
millennials is reaching the typical homebuying age, fewer are able to afford it
than previous generations at their age. Nearly 45 million Americans will reach
the typical age for first-time homebuyers in the next 10 years, 3.1 million
more than in the 10 years prior, according to a recent analysis by Zillow. Over
the last five years, however, prices for starter homes have jumped 57% and
inventory is down 23%. As demand surges, the situation can only get worse.
“The potential first-time
buyer bulge, without inventory to meet it, suggests that the typical age of
first-time buyers will continue to be pushed further and further out,” said
Skylar Olsen, Zillow’s director of economic research. “The rate of
single-family construction is still behind the pace we experienced in the
1990s, and without an increase in truly new supply, would-be first-time buyers
will instead persist in the rental market.”
Inventory of homes for
sale in smaller U.S. markets tends to be more plentiful than in major cities,
but that is changing as demand rises. The Madison market is getting
increasingly competitive.
“It’s pretty competitive
in the Madison area right now. In the median price range around $265,000, a
majority of the listings will have competing offers,” Ziegler said.
Norb Leahy, Dunwoody
GA Tea Party Leader
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