Real Estate News

More millennials eschewing big-city life for homeownership

Published: 06 Nov 2017

The expectation among many housing market experts for years was that when millennials wanted to stop renting and start owning homes, they would move from big cities to the suburbs like their parents did. However, that's not happening as expected, often because millennials tend to be either moving to smaller (but still good-sized) cities or away from urban centers, where properties are still quite inexpensive.

One city where this trend is really starting to catch on is Columbus, Indiana, where the average home tends to carry an asking price of only about $150,000, and the millennial population has grown 62 percent since 2010, according to Stateline. Meanwhile, even those who are still working their way up to being able to buy a home can rent far more affordably in these regions, pushing their future buying power.

However, those who got in on the ground floor of this trend are the most likely to benefit, as  experts don't believe low prices in these metro areas will last forever, the report said.

"As these 'real America' towns become more attractive to today's upwardly mobile youth, they should come to expect a rise in housing prices along with more upscale millennial amenities," William Frey, a demographer at the Brookings Institution, told Stateline.

Indeed, rates are likely to rise before the end of the year, as are home prices. As a consequence, buyers who can get into the market sooner rather than later can lock in high affordability that keeps their long-term costs down.

More millennials are moving to unexpected parts of the country.More millennials are moving to smaller cities in largely rural areas.

Other regions benefiting as well
Along similar lines, many places in the Midwest and Mid-South are now getting the benefit of millennials exfiltrating from big cities like Chicago and on the coasts, according to MarketWatch. Data from Ellie Mae suggests that millennial buyers make up almost half of all mortgages now being issued in a number of both small cities and more rural areas, often in places like the Dakotas, Ohio, Illinois and Tennessee.

"As millennials continue to enter the housing market, we are seeing great activity in the middle of the U.S., where inventory is generally more affordable than on the coasts," Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae, told the site.

Nationwide, about 1 in 3 available properties are considered "unaffordable" (that is, carrying costs that would make up more than 30 percent of a buyer's monthly pay) for the typical millennial, and that number is on the rise, the report said. However, in Athens, Ohio, the average mortgage costs buyers roughly one-third of what it would cost to make the same purchase in Boston.

A different kind of millennial mortgage
Meanwhile, older millennials are also starting to reshape the mortgage market overall, according to additional Ellie Mae data. In September, about 1 in 7 mortgages issued to millennials were for refinances, rather than purchases, marking the highest level observed in the market since February. While that number falls well short of the 38 percent of all mortgages issued for refinances in September, it does show that millennials are not only staying in their homes, but also acting to keep their long-term costs down in today's low-rate environment.