The millennial generation, or simply millennials, are defined as those born between 1982 and 2000. The U.S. Census Bureau estimates there are 83.1 million millennials as of 2015, or more than 25% of nation’s population. This exceeds the 75.4 million baby boomers. It is a more diverse group than previous generations, with 44.2% being part of a minority race or ethnic group.
A large number of people in this generation makes it influential on the economy, including real estate.
Entering their prime
The oldest Millennials are in their mid-30s, while the youngest are still teenagers. Traditionally, peak home buying years are between the ages of 25 and 45 years old, meaning many are in their prime buying years or approaching it.
There was talk several years ago that many millennials were eschewing home ownership. The generation witnessed turbulent economic times, including the dot.com and housing bubble bursting, and the Great Recession.
Nonetheless, many do want to own a home. According to a 2015 survey by Chose Home Warranty, 30% of Millennials plan to buy a home within the next five years. Millennials also comprised 32% of the U.S. housing market in 2014, up from 28% in 2012.
Millennials are well-educated, with over 47% of those between the ages of 25 and 34 having a post-secondary education degree, compared to about 30% in 1992. However, this has also come at a price, with students taking on more debt. The average 2016 graduate has over $37,000 in student loans, up 6% in the last year. There is a staggering $1.3 trillion in student loan debt among 44 million borrowers. Some have taken to move back home to save money and pay down debt. While this is a short-term hindrance education and income are positively correlated. Therefore, this should translate into higher earnings down the road, helping housing prices.
The employment market has been challenging for millennials. Along with higher student loan debt, many entered a workforce that was challenging, putting it mildly. The good news is that it is improving, albeit slowly. However, the unemployment rate among those 18 to 29 years old was about 8%, more than the national figure of about 5%, and the broader U-6 measure was 12.7% in September. A previous study in 2011 showed the underemployment rate in the 18 – 24 age group was 28.6%, the highest in the various age brackets.
Where do millennials want to live?
It has been well-documented that Millennials enjoy the city life, unusually large metropolitan areas such as New York and San Francisco. This is backed up the data, with a recent survey by apartment search site Abode showing one in five millennials stating New York is their ideal city. San Francisco, Seattle, Portland, and Los Angeles are the next four on the list. Out of the top 20 qualities essential to the group, New York City has 90% (Philadelphia has 95%).
Millennials will no doubt create future demand for housing, although the impact has been delayed by factors such as student loan debt and a sluggish job market. Many have put off getting married, and the dream of kids and a yard are not currently a priority. The flip side is many neighborhoods, such as Red Hook and Williamsburg, are being revitalized.
These factors create a desirable place for many millennials, making New York primed to experience increased demand in the coming years.