Are millennial buyers being forced out of the urban areas they prefer?
By Inman staff writer, Amber Taufen
- NAR reported that 35 percent of buyers in the time surveyed were 35 years old or younger — the largest group of homebuyers — and that they are increasingly buying homes in suburban areas.
- Anecdotal evidence indicates that millennials are doing this not because they are maturing and want to live in the suburbs, but because they’re being priced out of their preferred urban neighborhoods.
I have some anecdotal evidence that the answer to the question in the headline is “yes.” Although I’m a (very old) millennial who moved to a city suburb by choice, two of my friends who bought homes last year — both of whom had been renting at Denver addresses — purchased property in Lakewood.
After looking in Denver, both friends (actually, two sets of married couples, with dual incomes and steady jobs) realized they couldn’t afford city prices and decided to commute.Is this a trend? NAR says ‘yes’ … to half the hypothesis
This is in keeping with the latest National Association of Realtors (NAR) Home Buyer and Seller Generational Trends study, released last week. NARreported that 35 percent of buyers in the time surveyed were 35 years old or younger — the largest group of homebuyers.
“Overall, the majority of buyers in all generations continue to purchase a single-family home in a suburban area, and the younger the buyer, the older the home they purchased,” reported NAR in a press release.
“The median age of a millennial homebuyer is 30 years old, which typically is the time in life where one settles down to marry and raise a family,” said Lawrence Yun, NAR’s chief economist, in a statement. “Even if an urban setting is where they’d like to buy their first home, the need for more space at an affordable price is for the most part pushing their search further out.
“Furthermore, limited inventory in millennials’ price range, minimal entry-level condo construction and affordability pressures make buying in the city extremely difficult for most young households,” he said.
Now, my friends might be settling down to raise families, but the second part of that statement sounds a lot more true to their experience than the first.Look at the age of the homes and the location of the suburbs to see the big picture
Only 11 percent of millennial buyers purchased a new home, compared to 19 percent of the general population. And almost half of millennial buyers (48 percent) bought a home built between 1912 and 1985.
“Millennials are buying the oldest homes,” points out Sarah Jones, broker and co-owner of Bamboo Realty, which operates in Denver, Dallas, Fort Worth and Houston. “Well, if they’re moving out of the suburbs and buying the oldest homes, they’re buying in the most close-in suburbs, and those are not typically the suburbs that have the best schools and the best infrastructures.”
St. Paul, Minnesota, broker Teresa Boardman said she is seeing this trend in her area, too. “I just had a conversation with a young man yesterday on that very topic,” she said. “They cannot find suitable homes in the city that they can afford and are now looking in first-ring suburbs.”Second, third, fourth choice of neighborhood
“Buyers who come to us start their search in the city,” said Stacie Perrault Staub, a broker-associate at LIVE Urban Real Estate in Denver. “They quickly realize they’re not going to be able to afford to buy something in the city.
“Luckily, in Denver, there are a lot of up-and-coming suburbs — like Wheat Ridge, Edgewater, Lakewood, Morrison. But they’re definitely priced out of Denver.”
“We do a lot of rentals, and over time, people eventually buy,” explained Jones. “Most of them want to buy in the urban areas where they rented — they say they’re going to rent for a year or two and see how they like the neighborhood.
“There are some first-time buyers with very strong budgets because they’re buying later or paired up,” Jones noted, “but then there are others who are buying earlier and don’t have that kind of income flexibility, and they do get forced out. Usually it gets to their third or fourth choice of neighborhood before they can afford it.”
This could be somewhat backed up by an even more recent NAR survey, theHousing Opportunity and Market Experience quarterly report that was released earlier this week.
Although NAR highlighted the need for more single-family home construction, this finding stood out to me:
“Most respondents indicated their preference to stay in a similar area to their current living situation if they were to buy in the next six months,” reported NAR. “Over two-thirds of those living in rural areas and 75 percent of those living in suburban areas would buy in a similar area. Only those living in an urban area would be more likely to move elsewhere, with a suburban area within 20 miles of the city being the most frequent choice of urban buyers moving to another type of area.”
It would be interesting to know whether the respondents surveyed for the HOME report had already started looking at options and knew they couldn’t afford to stay in their current neighborhood, or whether their decision to leave their urban area was truly a choice.
Unfortunately, the buyer and seller generational profile doesn’t shed much light. NAR asked respondents why they chose to buy in their neighborhood; convenience and proximity to amenities were options presented to respondents, but data on affordability’s effect on neighborhood choice does not seem to have been collected.Are millennial buyers making compromises in school districts and elsewhere?
This might be happening in some cities — however, my friends in Denver who don’t have kids yet aren’t locking themselves into years in a bad school district if they can’t afford their first-choice neighborhood.
“Yes, they are looking for a house in a certain neighborhood sometimes,” said Staub, “but more often, they’re hiring education consultants who are helping them get into the right charter or magnate schools or private schools.”
Article taken from http://www.inman.com/2016/03/18/millennial-buyers-…