More millennials and young Gen Xers are leaving big cities and opting for smaller towns and suburbs. This according to recent U.S. census data, which shows that on average, 30,000 millennials and Gen Xers (between the ages of 25 and 39) have left big cities each year since 2014.
Factors such as affordable housing and lower cost-of-living are encouraging millennials to ditch city living for the suburbs; however, new technology advancements are also making the move away from cities more attainable than ever before.
Are millennials still pursuing homeownership?
In the past decade, millennial homeownership has taken a backseat to renting. According to Pew Research, two-thirds of millennial-headed households rented their home in 2016. For comparison, in 2006, rental numbers hovered around 56% for adults under the age of 35.
Some speculate that the proliferation of the “sharing economy” (think AirBnb and Uber) is already shifting mindsets around ownership. In effect, renting and borrowing is becoming the norm, while ownership is considered a “luxury.”
Survey data paints a different picture however. According to the same Pew Research survey, 72% of renters said they would like to buy a home at some point. Additionally, traffic data from sites like realtor.com demonstrate record-high interest in home ownership.
So what’s keeping millennials from buying homes? As we’ve previously discussed, a number of market conditions are stifling millennial home ownership.
This year, national home prices increased 3.6% and are expected to increase 5.8% in 2020. Despite improved employment figures, millennials are still unable to keep up with rising home prices, especially in the face of mounting student debt which totaled nearly $500 billion this year among millennials.
Millennials pursuing home ownership outside of major cities
Unfavorable market conditions are especially pronounced in major U.S. cities. According to the M Report, in the 50 most populous cities, it would take 13 years for a homebuyer to save enough for a house payment if they saved 30% of their income.
Owning a home in a major city has become nearly unattainable for the majority of prospective buyers. As a result, many millennials are moving outside of the city center and migrating to suburban communities.
The modern draw to suburbia is different from the wave of homebuyers who left cities in the 1950s for suburban communities. This time around, homebuyers are moving en masse to communities that meet their millennial-minded requirements including easy access to a nearby city and moderate weather. According to the Wall Street Journal, these types of communities are growing at twice the rate of their closest cities.
While proximity to a major city is a favored factor for most millennials, exurbs are also being revived for the first time in decades. According Fannie Mae loan data, millennials are purchasing homes that are “on average more than 16 miles from central business districts — the greatest distance since 2004.” These exurbs, dubbed “commuter towns,” offer attainable avenues for homeownership for millennials and young Gen Xers who are priced-out of home ownership in major cities.
Suburb and exurb life is more attractive than ever
Unlike decades past, moving outside of the city no longer means a loss of convenience. Technology advancements and new ways of working are shifting perspectives around distance and making suburban life more attractive than ever.
TELECOMMUTING MAKES WORK FROM ANYWHERE POSSIBLE
Telecommuting is no longer reserved for the self-employed. More than 1 in 20 Americans now usually work from home, according to US Census Bureau statistics. A recent Washington Post article reports that telecommuting is now the third most common means of commuting, even surpassing public transportation.
As new cloud-based technologies make telecommuting possible and normalized, living away from a major city will no longer require inconvenient commute times.
ON-DEMAND DELIVERY IS SHORTENING PERCEIVED DISTANCES
Living away from an urban center no longer means limited access to retail. eCommerce giants like Amazon are quickly improving fulfillment infrastructure to reach every corner of America. According to a recent report, Amazon now has “warehouses within 20 miles of half the U.S. population.”
As delivery times shorten through enhanced technology and improved fulfillment infrastructure, city living will no longer be a requirement for the retail-minded.
SELF DRIVING CARS WILL OFFER LESS STRESSFUL COMMUTES
According to Dr. Lance B. Eliot, an Artificial Intelligence (AI) expert, autonomous cars will “accelerate and enable the exodus [of millennials toward the suburbs] tenfold and spur nearly all generations toward living outside the big cities.”
Self-driving cars will enable those who do choose to commute into city centers to sleep, work, or remotely interact with anyone while they drive into work. Ultimately, self-driving cars will give commuters their time back.
For more on the future of homeownership, join us at the Future of Real Estate Summit in Austin, Texas this January to hear from experts who are reimagining home ownership models.