May 11th, 2015
Millennials, also known as Generation Y, are quickly becoming the largest group of homebuyers in the U.S. In 2013, Generation Y made up 32 percent of homebuyers, a 1 percent rise from the previous year, according to a study from the National Association of Realtors (NAR). In particular, adults in their early 30s are the largest group of buyers. Additionally, 13 percent of homebuyers are multigenerational families, such as parents and children or grandparents. The most common reasons for a multi-generational living arrangement are cost savings and accommodating adult children who are moving in with their parents.
Millennials are set to surpass baby boomers as the largest living generation, and many are entering the peak time of their lives to buy a home for the first time. However, many members of Generation Y have large amounts of student loan debt because they are also one of the most educated generations. More than 80 percent of Generation X and millennial individuals surveyed by the NAR reported that purchasing a home was a good investment and helped them achieve long-term financial stability.
Where can millennials buy?
Many of the areas young adults most want to move to are pricey and have limited housing, such as New York City, San Francisco and Seattle. Coastal cities are often restricted in terms of having space to expand, which makes the housing market in these places highly competitive. Because spring is a popular time to purchase a home, many properties in certain regions move quickly. In fact, a report from Trulia revealed eight of the top 10 fastest-moving housing markets were in California. San Francisco, San Jose, Oakland, San Diego and Orange County grabbed the top five sports despite California’s ongoing drought conditions and water restrictions. The state has seen a great deal of job growth, making it an attractive destination for millennials.
First-time buyers need to be aware that time is of the essence when considering a home purchase or they may miss out on their top choices. Zillow recently calculated the top cities where millennials could afford to buy a home by taking the median income of young adults in different metro areas and figuring they put 5 percent down and spend 30 percent of their monthly incomes on mortgage payments. In New York City, Boston and Miami, fewer than 60 percent of all properties listed on Zillow were affordable for average 23- to 34-year olds in the fourth quarter of 2014.
Cities away from the coasts were more affordable for younger buyers. Akron, Ohio; Buffalo, New York; and St. Louis, Missouri, were the top metro areas for young adults. San Francisco has a median asking price of $1.09 million and also faces a hot housing market because of relatively small amounts of new construction due to limited space, according to Trulia. To get the right home in more competitive markets, first-time buyers need to move quickly.