A flurry of financial obstacles and lifestyle choices are stalling the journey to homeownership for many young adults, but becoming a homeowner is currently more feasible in some less expensive metro areas with steady job growth and lower qualifying incomes needed to buy, according to new research by the National Association of Realtors.
NAR analyzed employment gains, population trends, income levels and housing conditions in the largest 100 metropolitan statistical areas across the country to identify the best purchase markets for millennial homebuyers.
Lawrence Yun, NAR chief economist, says although millennials have made up the largest share of buyers for three consecutive years, sales to first-time buyers and the homeownership rate for young adults under the age of 35 remain depressed at levels not seen in decades. This is despite historically low mortgage rates, escalating rental costs and low unemployment levels among those with a college education.
“Even with potentially higher incomes, prospective millennial homebuyers residing in some of the most expensive cities in the country face the onerous task of paying steep rents while trying to save for an adequate down payment,” he said. “However, for those currently living in or looking to move to a more affordable part of the country, there are metro areas right now with solid job growth and that offer a smoother path to homeownership.”
The top 10 metro areas NAR identified were chosen for their above-average share of current millennial residents and recent movers, favorable employment opportunities and relatively low qualifying incomes needed to purchase a home5.
NAR’s study found that the best purchase markets for millennials buyers currently are (listed alphabetically):
- Austin, Texas
- Charleston, South Carolina
- Minneapolis, Minnesota
- Ogden, Utah
- Portland, Oregon
- Raleigh, North Carolina
- Salt Lake City
- Washington, D.C.
Other markets NAR identified for having promising potential for millennial homebuyers include:
- Des Moines, Iowa
- Jacksonville, Florida
- Nashville, Tennessee
According to Yun, during the early stages of the economic recovery some of the largest metro areas – such as New York and parts of California – were attractive to millennials for their strong job markets, but their higher costs of living made it difficult to buy. Now that many more affordable, middle-tier cities have mostly recovered from the downturn and are once again experiencing robust job growth, millennials moving to some of these cities will likely realize they’re earning enough to purchase their first home.
“An overwhelming majority of young renters recently said they eventually want to buy a home,” adds Yun. “As long as new and existing-home supply keeps up to meet demand and holds prices from rising too quickly, these identified areas are poised to lead the way in helping millennials realize their American Dream of becoming a homeowner.”