The National Association of Realtors (NAR) has identified the top 10 purchase markets for millennial homebuyers, those 18-34 years of age.
The study, which said financial obstacles and lifestyle choices are delaying the journey to homeownership for many young adults, analyzed employment gains, population trends, income levels, and housing conditions in the largest 100 metropolitan statistical areas across the country. The study found that markets with a higher-than-average percentage of millennials living in them had two things: plenty of job options and an overall lower income needed to qualify for mortgages.
“Even with potentially higher incomes, prospective millennial homebuyers residing in some of the most expensive cities in the country face the onerous task of paying steep rents while trying to save for an adequate down payment,” said Lawrence Yun, chief economist for NAR.
“However, for those currently living in or looking to move to a more affordable part of the country, there are metro areas right now with solid job growth and that offer a smoother path to homeownership.
The top 10 purchase markets for millennial homebuyers, according to the NAR study, are (listed alphabetically):
- Austin, Texas
- Charleston, South Carolina
- Denver, Colorado
- Minneapolis, Minnesota
- Ogden, Utah
- Portland, Oregon
- Raleigh, North Carolina
- Salt Lake City, Utah
- Seattle, Washington
- Washington D.C.
The study found that millennials were attracted to some of the largest metro areas such as New York and parts of California for their strong job markets, but the higher cost of living made it difficult to purchase. Other promising metro markets for millennial homebuyers were:
“An overwhelming majority of young renters recently said they eventually want to buy a home,” Yun said. “As long as new and existing-home supply keeps up to meet demand and holds prices from rising too quickly, these identified areas are poised to lead the way in helping millennials realize their American Dream of becoming a homeowner.”
Spring Selling Season
The housing market has been on fire since entering the spring selling season. New homes are selling at the fastest pace since the financial crisis, with sales rising 16.6 percent in April. Existing-home sales, which includes single-family homes, townhomes, condominiums and co-ops, rose 1.7 percent in April for the second consecutive month. Sales are now up six percent from April 2015.
“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” said Yun.
National home prices have also increased during the spring selling season, as the national basis for single-family home prices rose 5.2 percent in the 12 months ended in March. Home prices in the S&P/Case-Shiller 20-City Index, which measures the value of residential real estate in 20 of the biggest U.S. metropolitan areas, were 5.4 percent higher than the previous year.
“The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
According to a recent report by the National Association of Realtors, pending homes sales — home purchases under contract — increased for the thrid consecutive month in April, rising 4.6 percent from the previous year. The report predicts that 2016 will see approximately 5.41 million homes sold, a three percent increase from 2015.
“April is often a bellwether month for how the spring and year will wind up,” said Jonathan Smoke, chief economist at Realtor.com. “We saw almost a half-million new listings come onto the market in April, so buyers appear to be jumping on the fresh inventory.”
Millennial Homebuyers in 2016
The National Association of Realtors published a study earlier this year that showed a growing number of millennial homebuyers moving to the suburbs. The study, 2016 Home buyer and Seller Generational Trends, found that millennials purchasing homes in urban areas decreased to 17 percent in 2015, from 21 percent a year ago.
“The median age of a millennial homebuyer is 30 years, which typically is the time in life where one settles down to marry and raise a family, said Yun. “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.”
The problem for millennial homebuyers is that prices for entry-level homes continue to rise. According to Trulia, the number of available entry-level homes listed on the market had fallen 43.6 percent over the past four years, while the prices for these start homes increased 5.6 percent over the same period.