Mar 22

Millennials: Delaying the Move from Gotham to Mayberry

There has been a flurry of news reports recently touting the droves of Millennials flocking to the suburbs. Although this may make for a great headline, the message is not representative of what is actually occurring within the housing market.

First, the cited survey by the National Association of Realtors (NAR) focuses on Millennial homebuyers, not migration patterns of Millennials, which includes buyers and renters—these are two very different subjects. Second, the key point in the survey’s first paragraph indicates that when Millennials do buy a home, they are buying outside of the central city. This is not news, but is expected, given central city pricing and substandard city schools. The article is not making the point that all Millennials are moving to the burbs in droves.

As it relates to Millennials moving into and out of the city/suburbs (both renters and buyers):

1. Net migration of 18-34-year-olds to the suburbs is nothing new.

2. What is new is the substantial decline in the rate of net migration to the suburbs (the difference between those moving from the city to the suburbs and from the suburbs to the city) among 18-34-year-olds.

  • During the period 1999/2000, net migration of 18-34-year-olds to the suburbs was 1.9 percent of 18-34-year-olds. During the 2013/2014 period, this declined by more than half to 0.8 percent of 18-34-year-olds, as reflected in the following chart:

Because of this significant decline in the rate of net migrations to the suburbs, even though the size of the 18-34-year age cohort increased from 64 million to 72 million between 1999 and 2014, the net number moving to the suburbs declined by 643,000. Said another way, there are 643,000 more Millennials living in cities due to reduction in migration to suburbs and population growth.

3. Importantly, the reduction in net migration to the suburbs has been caused by a significant reduction in the percentage of people moving from the city to the suburbs.

  • During the period 1999/2000, 4.1 percent of 18-34-year-olds moved from the city to the suburbs. During the period 2013/2014, 2.7 percent moved from the city to the suburbs, a 36 percent decline in the rate of migration from the city to the suburbs—Millennials are delaying the move from Gotham to Mayberry.

4. “I won’t go!” Interestingly, 25-29-year-olds seem to be the age group most resisting the move to Mayberry.

  • The rate of migration among 25-29-year-olds from the city to the suburbs declined nearly 50 percent between the 1999/2000 and 2013/2014 timeframes, falling from 4.8 percent to 2.5 percent.

5. As we wrote about in a research piece on our website titled, “Millennial Mirage,” Millennials aren’t necessarily different in their cohabitation, as they are having children and wanting to own homes, but they are delaying these events. As the age cohort that will be replacing Millennials is smaller, we expect that today’s demographic and lifestyle tailwind will become a headwind as investors are building for today’s demand and not necessarily planning for any reductions in future demand related to the smaller population of young renters.

Summary: Urban multifamily housing will experience a continuing tailwind for the foreseeable future, but it won’t last forever, especially in markets where homeownership is more affordable.

Source: Millennials: Delaying the Move from Gotham to Mayberry

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