This story was originally published in Builder.
Ask a Millennial which is the most mobile generation of young adults in history, and odds are pretty good they'll tell you it's their cohort, ones born roughly within the years 1980 to 2000, give or take.
And he or she--although more likely to be higher educated, technologically untethered, and capable of living a "distributed worker" lifestyle just about anywhere in the country--would be wrong to reach that conclusion.
We've actually heard that conversational exchange, a young man asserting as obvious fact that people in their 20s and 30s now are far more likely to move from home to home and place to place than ever because they can. And as sure of himself as he was, he was wrong.
One day, it will be fascinating to look back on this massive 70-something million cohort of people over 20 and nearing 40, and really know how--if at all--their behaviors differ from the rest of us generations that came of age when we did, with attitudes, preferences, and beliefs that change and with values that stay constant through the millennia.
For now, though, somewhere between 30% and 40% of the new residential investment, development, and construction marketplace depends on those behaviors and what can motivate them, one way or another.
It has and will continue to be one of home building's biggest riddles to solve--and one whose solution will need to come even as pressures on costs, for labor, for building lots, for financial capital, and for materials may be expected to remain unrelenting. This Pew Research analysis paints a picture of a generation whose educational attainment, employment, and earnings power--particularly in a more dynamic economy--impress, but whose actual housing and family formation behaviors continue to dismay experts.
Millennials, hit hard by the Great Recession, have been somewhat slower in forming their own households than previous generations. They’re more likely to live in their parents’ home and also more likely to be at home for longer stretches. In 2018, 15% of Millennials (ages 25 to 37) were living in their parents’ home. This is nearly double the share of early Boomers and Silents (8% each) and 6 percentage points higher than Gen Xers who did so when they were the same age.
The rise in young adults living at home is especially prominent among those with lower education. Millennials who never attended college were twice as likely as those with a bachelor’s degree or more to live with their parents (20% vs. 10%). This gap was narrower or nonexistent in previous generations. Roughly equal shares of Silents (about 7% each) lived in their parents’ home when they were ages 25 to 37, regardless of educational attainment.
Millennials are also moving significantly less than earlier generations of young adults. About one-in-six Millennials ages 25 to 37 (16%) have moved in the past year. For previous generations at the same age, roughly a quarter had.
So, there, you see Millennials move less and form families later, which means that understanding which of them moves, where, and why is a pretty critical piece of information to learn and act on when it comes to land positioning, new product and community development, pricing, and other operational factors that go with trying to serve the lower-priced, entry-level, first-time buyer marketplace.
At the same time, Millennials are motivated by a timeless value to want "a better home." The National Association of Home Builders, which in April observes New Homes Month, quotes data from the American Housing Survey (AHS) confirms nearly two out of three first-time home buyers say a better home is the top reason for moving, followed by household formation, 61% and a better neighborhood, 49%.
This is exactly the reason that, in order to be smarter about what they do, builders and their investment and development partners need to get why Millennials gravitate--for jobs, for a lifestyle, for housing options, and other reasons--to one place versus another in today's economic and social climate.
Ali Wolf, director of economic research at BUILDER sibling unit Meyers Research, has both data and insight that can make for smarter land, product, messaging, pricing, and programming decisions among builders, developers, and investors, and their partners.
This year, we added a new question to our survey: Have you seriously considered moving out of your current city? If yes, to where and why? Much to our surprise, nearly 60% of our respondents said yes. Of those respondents:
- The younger Millennials are more flexible. 70% of Millennials aged 19-24 have seriously considered moving compared to 45% of those 35 to 39.
- Owning a home is a deterrent. 60% of renters are open to moving compared to 40% for existing homeowners. For reference, Millennials make up a large share of closed loan applications in Baltimore, Houston, Chicago, Minneapolis, and Nashville, according to Ellie Mae.
- Expensive markets rank high. Denver, Portland, Seattle, Washington, DC, and New York City were the top five desired locations. Those considering Denver, Portland, and Seattle were already located in the West. The desire to move to Washington, DC and New York City came from outside the Northeast.
Regardless of the city of origin, the driving factors to move included job opportunities (30% of respondents), affordability (20%), and lifestyle (12%). Using this information, we created an index to capture the markets most poised for Millennial success. See the map below and the index details at the bottom of this article.
And here's how those high-level motivators play out in migratory trends Wolf notes from the data, which is instructive not only in saying why a market's working magnetic magic, but also why some markets are exerting the opposite effect on Millennial would-be movers:
- Texas dominates top spots. Dallas and Houston ranked extremely well for quality of life, cost of living, and overall employment opportunities, propelling the markets to #1 and #2, respectively. Austin, a far smaller metro, rounds out the top three, with a heavier focus on relative housing affordability and the fun factor.
- Phoenix lands at #4. The labor market helped and hurt Phoenix with strong employment opportunities but modest salaries. The lower than average Millennial wages are partially offset by a favorable cost of living. The fun factor pulled Phoenix lower than Austin.
- Two factors drive Orlando to #5. Employment opportunities in Orlando, while concentrated in a few sectors, are plentiful with 4.0% job growth YOY. Like Phoenix, Orlando’s score was dinged by very low Millennial salaries, but the cost of living helps mitigate some of the effects. For example, 85% of total new housing units planned had a minimum price below the local FHA loan limit of $314,827, according to Zonda.
- Lower than you’d think. While highly recognized as a Millennial hotbed, Denver’s desirability was pushed down by affordability factors but remains attractive from a quality of life standpoint and lands at #6 on our list.
This story was originally published in Builder.