September 18th, 2014
Analysts have been harping on the issues of millennial homebuyers ad nauseam – citing low homeownership rates, high student debt and other problems – but a recent report from the Demand Institute revealed these assertions may not have as much weight as economist believe.
The New York-based think tank that is co-owned by Nielsen and The Conference Board surveyed more than 1,000 millennial households, which are defined as residents age 18 to 29. The researchers sought to get an idea of what future housing and community demand looks like by asking millennials about where they currently live, what they want from a home and their moving intentions.
The first key point from the study is that millennials aren’t interested in living under their parents’ roofs for years to come. In 2013, there were 13.3 million households in the U.S that were headed by a member of the millennial generation. The Demand Institute expects the number to expand to 21.6 million by 2018.
“During the downturn, an unprecedented share of young adults did choose to live with their parents rather than strike out on their own, hindering household formation and economic activity,” the report read. “As economic prospects improve, however, millennials will emerge from their parents’ basements.”
The suburbs are more popular than urban areas
In July, Trulia reported millennials are moving to suburban locations – specifically big-city suburbs and lower-density cities – to start their families much like previous generations. This conclusion was in spite of the expected trend of young adults opting for city living. The Demand Institute study corroborated this finding, as 48 percent of respondents said they want to live in a suburb when they find their next home. Meanwhile, 38 percent wanted an urban locale, and only 14 percent were seeking a rural abode.
“While some millennials aspire to a more urban lifestyle, the larger part of the cohort will seek benefits typical of the suburbs – more space, safer streets and better schools,” the report explained. “What’s more, most millennials are fine being a short drive – rather than walking distance – from grocery stores, restaurants and the like.”
The preference toward driving is further evidenced by the 88 percent of respondents who owned a car. As more ride-sharing services emerge, some analysts predicted fewer millennials would be car buyers. However, as shown by a study from AutoTrader.com, members of this generation are similar to Generation X and baby boomers when it comes to purchasing a car, as they want a vehicle now and are willing to accept cars from non-name brand manufacturers to achieve this goal.
Financial obstacles aren’t deterring millennials
Recently, the Federal Reserve Bank of New York published a report citing financial concerns as the top reasons renters aren’t becoming homeowners. Although wage growth has remained slow and the employment market has seen better days, millennials have a positive outlook for the future and their ability to own a home.
“They expect their finances to improve, and most have plans to move in the next five years,” the report read. “Further, millennials are looking to upgrade their living situations, whether that means moving into a nicer, more spacious rental or purchasing a home for the first time.”
Seventy-nine percent of respondents said they expect a boost to their financial situation, while 74 percent predicted they would move in the next five years. Among the reasons for moving were finding a better home or apartment (71 percent), gaining more space and privacy (59 percent), establishing a household (50 percent) and owning rather than renting (48 percent).