Millennials, 18-35 years old, are dominating the home buying sphere as they are now the largest share of new home buyers. Their entrance into this sphere, however, has not been easy. Median earnings for Millennials are just 20% of their Baby Boomer parents. Student debt is at historical highs. And, with relatively little or no inventory of homes for sale and rising prices, some Millennials may only get to dream about home ownership rather than become home owners.
There are, however, Millennial buyers. The 2017 State of the Nation’s Housing Report by the Joint Center for Housing Studies at Harvard University indicates that 1.4M Millennials became recent home buyers in 2016. This is a slight surge from the numbers of Millennial buyers in 2015 but well below, 33% below, pre-boom levels of young adult buyers in 2008.
Location is everything for Millennial home buyers. Small to midsize cities in the Midwest, South and Southwest are the main draws for this demographic. Among the top ten cities are Ogden, Utah with 51% Millennial home buyers, Grand Rapids, Wyoming with 45.3% Millennial home buyers and Des Moines, Iowa with 43.6% Millennial home buyers. The bottom cities for Millennial home ownership are expensive coastal cities (San Francisco, Los Angeles, San Diego, Honolulu, New York) and smaller college towns such as Chapel Hill. The heart of Silicon Valley (San Jose, Santa Clara, Sunnyvale) and college towns such as New Haven have experienced steep declines (-34%) in the number of young adult home owners over the last 10 years.
Obviously, Millennial home buyers want the biggest bang for the buck. Eight of the 10 metropolitan statistical areas (MSA) with relatively equitable home values that were measured in the Harvard Report are located in the South and Midwest. The only two cities outside of the South and Midwest are Bakersfield, CA and Spokane, WA.
Millennials without access to financial support from family members and/or friends do not make their home buying decisions on the spur of the moment. The average “save-up time”required for a down payment on a house costing $278,000. is approximately 15.6 years when you consider that buying Millennials are squirreling away 15% of their rent-bearing income per year. For many places, that “save-up time” is much longer…California requires the longest save-up time with Los Angeles requiring 32.2 years! On the other hand, cities/towns in Ohio and Pennsylvania only require 6.9 years of save-up time in order to come up with a down payment.
All told, Millennials account for just 7.5% of home buying value despite being the largest generation of adults today. (Boomers continue to hold the biggest value sway in the market.) Will that trend hold? Who knows but for the 80% of Millennials who plan to own a home someday, they may forego living “independently” in a rented unit and live instead with their parents or in groups of peers in order to “save” 15% of the time it takes them to save-up for a down payment for a home of their own.