How millennials are affecting the price of your home
It used to be that everyone wanted to buy a home,
seeking pleasure and security, as well as the potential
for future wealth.
But younger Americans are buying homes far less
often than their elders’ generations did, and that puts
a large sector of the U.S. economy at risk.
Millennial home ownership levels are dramatically
lower than the those of previous generations at a
similar age. In 1985, 45.5% of 25- to 34-year-olds
owned homes in the U.S. By 2015, this had fallen
Since the housing industry currently accounts for 15%
to 18% of the nation’s gross domestic product, any
change in established behavior could have substantial
consequences on the larger economy.
Researchers who are interested in the future of the
U.S. economy are faced with some difficult questions
about how millennials’ behavior is changing the
Recent research suggests that both increases and
decreases in home prices can be directly tied to
where millennials choose to live. If a long-term
behavioral change is afoot, and this generation
continues not to buy homes, it will very directly impact
Research has shown that younger generations lag
behind previous generations in terms of milestones
like homeownership and marriage.
One of the assets that set previous generations apart
is home equity. In 2001, Gen-Xers held an average of
US$130,000 in assets, compared to millennials in
2016 that held almost 31% less.
However, assets attributed to home equity are subject
to the whims of the housing market. Just ask anyone
still underwater on a home purchased before the
And home equity isn’t just vulnerable to large-scale
economic upheavals. In fact, it’s constantly
Age and cost
Analyzed data from the U.S. Census Bureau and
American Community Survey from about 800 of the
most populous counties in the U.S., or about 85% of
the population, in a study that has not yet been
published. The data shows a rather disconcerting
If no one ever moved from one county to another,
almost all counties would gradually grow older in
terms of average age.
However, the migration of primarily younger
individuals has caused an escalation in this aging
shift. Some areas are aging much more quickly than
expected. In those areas, home prices have been
vulnerable to long-term declines.
In other words, the trend of rising or falling home
values follows patterns of migration in the U.S.
From 2010 to 2016, counties with aging populations
were about 50% more likely to have experienced a
decline in home values than those counties that were
becoming “younger.” Not surprisingly, counties that
were becoming younger were often experiencing
increases in both populations and in the prices of
Two areas that provide an illustration of this are key to
the oil and gas industry: the Midland-Odessa area of
Texas and Ward County, North Dakota. Both areas
have experienced not only a net decrease in the age
of residents, but also a net increase in population.
This is far from a rural phenomenon. In Allegheny
County, the Pennsylvania county that’s home to
Pittsburgh, a similar increase in population has also
decreased the average age of its residents.
The cost of a home
Millennials’ migration to particular counties has fueled
speculative real estate transactions.
In 2018, such transactions are reaching levels just
below the pre-crisis highs, accounting for almost 11%
of all homes sold last year. The prices are inflated by
buyers looking to “flip” houses. This forces younger
buyers to compete with the professionals, pushing
them out of the markets they are migrating to.
Younger buyers are further frustrated by the cost of
what economists refer to as frictions. Frictions include
commissions that average 5% to 6% of the purchase
price, myriad inspection and appraisal fees, as well as
mortgage and title insurance. All of this runs counter
to the transparency and ease of access many
millennials have become used to in the modern world.
Since the younger generation is better educated, one
might expect significant wage increases to counter
some of these frictions. But recent graduates between
the ages of 22 and 27 earn about 2% less than their
predecessors did in 1990.
If home prices had also stayed relatively flat, this
likely wouldn’t be an issue. However, from 2000 to the
present, average home prices have increased by
about 3.8% annually, though this varies dramatically
from county to county.
As urban areas continue to attract more new
residents, many young people may need to reassess
the true value that home ownership offers.
Meanwhile, older generations are likely just becoming
aware of the impact of millennial migration on the
American dream. If you live in an area that is aging
faster than the natural rate, the probability of your
home value decreasing is very real.
Jimmie Lenz, Clinical Assistant Professor of Finance, University of South Carolina
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