Surprising Results of Studies on Millennials and Housing
The San Diego Union Tribune just published an article summarizing the research results of two studies on home ownership and millennials (those reaching young adulthood in the early 21st century). The majority of millennials actually favor living in the suburbs and base their homebuying decisions mostly on affordability.
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The Harvard study found that most assumptions associated with millennial homebuyers were untrue.
...among the misconceptions were that millennials wanted to live in urban locations closer to employment, commercial, and social centers; preferred the flexibility of renting; and were unwilling to take on the financial risks of ownership in the wake of the housing market collapse.
The evidence suggests, however, that homeownership decisions by younger households have much more to do with affordability than location and lifestyle preferences.
The key findings of the Zillow national study highlighted some of the latest home-buying trends:
- Almost 50 percent of millennial homeowners live in the suburbs, while 33 percent live in an urban neighborhood and just 20 percent live in a rural area.
- Of the millennial buyers who moved in the past year, 64 percent stayed in the same city and just 7 percent moved to a different state.
- When millennials become homeowners, they skip the traditional starter home by choosing larger properties with higher prices: They pay a median price of $217,000 for a home that is about 1,800 square feet, similar in size to what older generations buy.
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Since the housing collapse, San Diego developers have focused more on condos and apartments. This could lead to a shortage of available homes to buy as millennials come of age.
Molnar points out in the article, "...the difficulty for developers is finding land that will not face community and environmental opposition, as well as stringent criteria in government general plans." But at the same time, "...planners don’t exactly have a clear path forward in San Diego. Even with a ton of millennials boosting theoretical demand for housing, there is no significant indication that affordability constraints will ease."
The implications from these studies are significant, according to Barry Gittleman, President and COO for Salt Lake City-based Hamlet Homes. "Government officials, developers and homebuilders all need to recognize what homebuyers want today," according to Gittleman. "While each local market and each household is unique in what they want, there are usually significant trends, and the millennial group of homebuyers will become a rapidly growing portion of homebuyers over the next few years. The Harvard study indicates those under age 35 care most about affordability, more than location and lifestyle. While that group had a historic low homeownership rate of just 31% nationally in 2015, it is much higher in areas like our Salt Lake market with great affordability. That should send a message to our industry about how to engage this large group of potential homeowners."