Economists are banking on 2015 to be the year leading-edge millennials finally start to stream into the housing market. To get an idea of what changes can be expected if the generation does take the plunge, we've gathered data on millennial home buying behavior the past three years in metropolitan statistical areas (MSA) where the 25-34 year-old population is most concentrated.
The only generation defined by the Census Bureau is Baby Boomers, a bracket from 1946 to 1964. In order to get as clear of a picture as possible across both Census and Metrostudy, we used the age range of 25-34 as our leading-edge Millennial age range when pulling data.
To identify MSAs with high shares of leading-edge millennials as a percent of the population, we pulled American Community Survey data and pulled any MSA where millennials accounted for 15 percent or more of the total population. Our interactive map below displays the 13 metros that fit the criteria.
Of the millennial magnets during the 2011 through 2013 American Community Survey period, several markets sold at least a third of new homes to the 25 through 34 age group. What looking at the top tier millennial targets tells us is affordability is just as important as analysts say, and millennial buyers found it in Utah. Beyond the top three, some other key findings include the appearance of a college town market, Madison, Wisconsin, making the list with an estimated 34.2 percent of new-home sales to the older millennial sect. While often outside bigger MSAs, college towns have proven attractive to both entry-level and active adult buyers seeking retirement communities near their alma mater. The most expensive city to make the list, Washington, DC, attracted millennial homebuyers for close to a third of all new-home sales from 2011 through 2013 despite median closing prices holding above the $400,000 mark. Here is a closer look the top three for highest estimated percentage of millennial buyers, all of which experienced median prices below $300,000 for the three year period.
The sticker shock many first-time buyers are facing nationwide hasn’t hit Provo, where nearly half of new homes purchased in the Provo-Orem, Utah market from 2011 through 2013 were sold to millennials. With an estimated 47.8 percent of closings with a known household age going to buyers between 25 and 34, it’s no question the Utah market was an affordable one for the entry-level buyer in the last few years. During that time, median closing price for a new-home began rising, leaping from $232,900 in 2011 to $289,000 in 2013. So far in 2014, the market has held a new-home median closing price north of the $300,000 price point, with the median for the year currently $301,700. The market so kind to millennials a few years ago is in danger of losing affordability appeal that fueled a steady increase in new-home closings from 1,262 in 2011 to 1,752 in 2013.
Second in highest percentage of new homes sold to millennials in a millennial migratory magnet during the ACS period is another Utah market. Of new homes closed between 2011 and 2013 in Ogden and Clearfield, an estimated 39.8 percent of new homes were sold to buyers between the ages of 25 and 34. The market also welcomed a moderate increase in year-over-year new-home sales jumping 29.2 percent from 1,065 to 1,376 between 2011 and 2013. While some of this increase is likely attributed to slow and steady recession recovery, affordability played a key role in keeping the market a millennial magnet for both renters and buyers. Median closing price for a new-home in 2013 held just below the $300,000 price point at $298,400. This is a staggering increase from the median $245,800 just two years earlier. In 2014, median closing price is now at $318,700, once again indicating the affordability for the first-time buyer might not last.
The third millennial magnet selling a significant chunk of new homes to the young 25 through 34 age bracket is in—you guessed it—Utah. The state successfully attracted buyers with affordability during the 2011 through 2013 period with Salt Lake City new homes sold to buyers under 35 an estimated 39.5 percent of the time. During that time, the market experienced a 55.5 percent jump in new-home sales between 2011 and 2013 from 1,648 closings to 2,563. Like the other Utah markets attracting millennial new-home buyers, Salt Lake City experienced price appreciation in the last year with a jump from a median new-home closing price at $290,000 in 2013 to $303,700 in 2014.
Decreased affordability in markets that attracted younger buyers changed sales demographics in some metros this year, but analysts are optimistic that 2015 will be a good one for home sales. Will more millennials migrate from multifamily to the new-home market or will the affordability squeeze of 2014 make way exclusively for the active adult buyer?