First-time homebuyers have been largely absent from the housing market in the current economic recovery, but some metropolitan areas—particularly in the Midwest and West—are well positioned to see increases in home-buying from the Millennial generation in upcoming years, according to new research by the National Association of REALTORS®.
NAR analyzed current housing conditions, job creation and population trends in metropolitan statistical areas across the U.S. to determine the best markets for aspiring, leading-edge Millennial homebuyers. Austin, Texas and Salt Lake City were identified as top standouts for Millennials for having a young adult population with solid job growth rates and still relatively affordable home prices. Seven of the 10 metro areas recognized are in the Midwest and West.
Lawrence Yun, NAR chief economist, says the homeownership rate for young adults under the age of 35 peaked in 2005 (43 percent) and fell to 36 percent in the first quarter of 2014.
“Limited job prospects, student debt and flat wage growth have combined with tight credit conditions and low inventory to price Millennials out of some of the top cities such as New York and San Francisco,” he says. “However, NAR research finds that there are other metro areas Millennials are moving to where job growth is strong and homeownership is more attainable. These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves.”
NAR analyzed 100 metro areas that have a large Millennial presence, solid local job market conditions and strong migration patterns of young adults moving to that particular area to determine the best purchase prospects for young buyers. Housing affordability and inventory availability were also considered.
The best purchase markets for aspiring Millennial homebuyers are (listed alphabetically):
Des Moines, Iowa
Grand Rapids, Michigan
Salt Lake City
Other markets with strong potential for attracting Millennial homebuyers include:
Raleigh, North Carolina
NAR President Steve Brown says favorable affordability in these markets will ultimately be met with inevitable life milestones to increase homebuying activity.
“Millennials will eventually settle down, trade their roommates for spouses and want to raise a family,” he says. “As long as median income continues to support purchasing power in most areas, the demand and opportunity will be there for Millennials to purchase their first home with guidance and insights from a REALTOR®.”