Moving past 'peak' millennial in housing
A few weeks back, I wrote about a Realtors study purporting to show an overwhelming consumer preference these days for single-family suburban homes.
A few weeks back, I wrote about a Realtors study purporting to show an overwhelming consumer preference these days for single-family suburban homes.
The study reported that only 15 percent of homeowners and 21 percent of renters said they would buy in an urban area.
My article focused on the dearth of new single-family detached construction in the suburbs, but it made me think that the back-to-the-city movement may be less of a tidal wave and not as permanent as its proponents have been suggesting.
Millennials have been singled out as the stuff cities are made of, but Dowell Myers, a professor at the University of Southern California's Price School of Public Policy, says the real estate industry should be bracing for a shift back to suburbs.
In fact, Myers says, 2015 marked a major turning point, as the country's urban centers reached "peak" millennial.
After more than a decade of growing concentration, the millennial trend of increased downtown living has peaked and is beginning to decline, he contends.
In a study published in late April in the journal Housing Policy Debate, Myers examined Realtor surveys and various sources of federal data.
Industry observers had long assumed millennials - defined for this study as those born between 1980 and 1999, 83 million strong - preferred to live in urban centers.
Myers, however, found that circumstance was the likely driver of urban living: Three cycles - one demographic, one economic, and one housing-based - converged in the 2000s to drive millennials into downtowns.
All three have reversed their effects, he said.
In the first cycle, cities were flooded by young people coming of age, he said.
From a low point in 1978, the number of babies born each year climbed 32 percent by 1990. The "peak" millennials born in 1990 turned 25 last year. Smaller cohorts will arrive at 25 from now on.
"The tide has ebbed, and fewer replacements will follow those who are moving on," Myers said.
Job growth was depressed and recovered slowly. More young people but fewer available positions had devastating effects, blocking millennials' entry into the job market.
Those forces prompted them into the "sharing economy" - living with roommates, or their parents or relatives - in gentrifying areas downtown.
The job market has loosened, Myers said, with the unemployment rate for millennials down to 5.2 percent from 10.4 percent in 2009 - nearly as low as the prerecession rate of 4.8 percent in 2007.
Now, a smaller number of young people are turning 25 just as jobs are opening up again.
The third factor that hindered millennial progress was the housing life cycle.
The housing bust and recession flung homeowners into renting and decimated new-home construction, creating extreme competition for rentals, which the Gen Xers also had filled.
With new apartment construction and home sales on the rise again, millennials have opportunities to move up, Myers said.
"The millennials may have seemed frozen in time, but they are not living in a two-bedroom apartment forever," he said. "The restrictions that blocked this housing life cycle are slowly being removed, but this generation will require even more."
Millennials, as they age, will partner up and will demand more space, he said.
The three cycles, in reverse, Myers said, will draw in smaller cohorts of young people to replace older peers, accelerate job success and career mobility, and open up more housing options - both rentals and homes for purchase.
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