The millennial age is considered to be those born between 1980 and 2000, they’re also considered to be the most influential generation in society today. Millennials’ preference and actions essentially shape our economy, including the real estate market. In an earlier blog of mine, I reflected on the housing market in 2015. Last year first-time home buyers accounted for a mere 32% of sales, which according to The Wall Street Journal, was an all time low in nearly three decades.
There were, and still are, a number of factors as to why the percentage of first-time buyers on the market has dropped significantly over the years. For one, millenials are more prone to get married and start a family later on in life compared to previous generations. Thus, they’re not looking for a home until, roughly, their thirties. The Great Recession also played a significant role in the millennial choice. As it was more difficult to find a secure job, with substantial pay, millennials were more or less forced to rent property in urban areas. In combination with rising student debt, millennials simply could not afford a home, even if they wanted. This was considered to be the beginning of the urban boom, where cities experienced a dramatic influx in population and rents soared to record highs.
Fortunately, for both the housing market and the economy, the millennial generation is growing up, they’re now considered to be those between the ages of 36 and 16. As the millennial age matures, and the economy bounces back from the recession, we’re seeing a bit of a shift in the millennial “preference”. While millenials were once believed to prefer urban living, demographer William Frey, suggested to fortune.com that millennials were “‘stuck’ in cities” while they endured the slow economic recovery.
An urban planning professor at USC, Dowell Myers, recently suggested this shift in millennial preference. Myers shared his opinion at the University of Texas City Forum last month, reflecting on those “peak” millennials who turned 25 last year. As those peak millennials begin to start families and become more successful in their careers, the urban boom we once knew, will inevitably recess.
Population is growing faster in suburban areas, compared to urban counties, which reiterates what Myers is suggesting. So perhaps it’s the end of the urban boom. Perhaps come 2025, when the tail end of the millennial age reaches 25, suburbanization will be in high-gear. Gone will be the days of booming cities; where young professionals flock to urban areas for the bustling nightlife and innovative culture. If those urban areas wish to keep their lively reputation, they’ll want to conform a bit, to appeal to the fleeing millennial age.
Check back for more blogs from Massoud Aaron Yashoufar on the real estate market!