Housing the Millennial Generation

Jed Kolko, Independent Economist

The Millennial housing myths

Millennials are fueling housing demand as they move out of their parents’ homes

Millennials have a different attitude toward housing and homeownership

Millennials are especially urban

Outline: the Millennial housing truths

1. Millennials are not driving today’s housing demand

2. Demographics explain Millennial housing behaviors

3. Millennials are less urban than previous generations

Peak age: 24

2455

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,0000 5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

+

Population by age, June 2015

data source: U.S. Census Bureau

Boomers are driving the increase in households

23

-85

159

-151 -196

391

860

264

-400

-200

0

200

400

600

800

1000

16-19 20-24 25-34 35-44 45-54 55-64 65-74 75+

Household formation, 2014-2015, by age of householder(thousands)

data source: U.S. Census Bureau

Young adults slipped in Q3 2015

Headship rate, 25-34 Living with parents, 25-34

48.0%

48.1%

48.2%

48.3%

48.4%

48.5%

48.6%

48.7%

48.8%

2013 Q3 2014 Q3 2015 Q3

13.8%

13.9%

14.0%

14.1%

14.2%

14.3%

14.4%

14.5%

2013 Q3 2014 Q3 2015 Q3

data source: U.S. Census Bureau

Millennials are still not back to work

data source: Bureau of Labor Statistics

72

74

76

78

80

82

84

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% employed, age 25-34

Growth will come from Boomers

2% 1%

-3%

8%

13%

-6%

2%

34%

42%

-10%

0%

10%

20%

30%

40%

50%

0-15 16-19 20-24 25-34 35-44 45-54 55-64 65-74 75+

Projected population growth by age group, 2015-2025

data source: U.S. Census Bureau

Outline: the Millennial housing truths

1. Millennials are not driving today’s housing demand

2. Demographics explain Millennial housing behaviors

3. Millennials are less urban than previous generations

Still in Mom & Dad’s basement

24%

25%

26%

27%

28%

29%

30%

31%

32%

% of 18-34 year-olds living in parents’ home

data source: U.S. Census Bureau

How Millennials really are different

49%

20%

0%

10%

20%

30%

40%

50%

60%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

% of 18-34 year-olds who are married with kids

data source: U.S. Census Bureau

Age at which majority are married or homeowners

25

27

29

31 31 3132 32 32

33 33 33

29

3233 33 33

34

36 3637

3839 39

20

25

30

35

40

1980 1990 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014

Married

Homeowners

data source: U.S. Census Bureau

Demographics explain long-term rise in living at home

24%

25%

26%

27%

28%

29%

30%

31%

32%

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

% 18-34 year-olds living in parents' homeactual vs. adjusted for demographic shifts

baseline = 1994-1999

actual (unadjusted)

demographics-adjusted

data source: U.S. Census Bureau

Demographics explain long-term decline in homeownership

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

Homeownership Rate, 18-34 year-oldsactual vs. adjusted for demographic shifts

baseline = 1994-1999

actual (unadjusted)

demographics-adjusted

data source: U.S. Census Bureau

Outline: the Millennial housing truths

1. Millennials are not driving today’s housing demand

2. Demographics explain Millennial housing behaviors

3. Millennials are less urban than previous generations

Millennials in cities? An urban legend.

% of college-educated 25-34 y.o.’s in hyper-urban neighborhoods

% of all 25-34 y.o.’s

in all urban neighborhoods

10.2%

11.9%

0%

2%

4%

6%

8%

10%

12%

14%

2000 2013

25.6% 25.3%

0%

5%

10%

15%

20%

25%

30%

2000 2013

data source: U.S. Census Bureau

An aging population boosts the suburbs

15%

20%

25%

30%

% living in urban neighborhoods, by age group

2000

2014

data source: U.S. Census Bureau

Metros with fastest millennial growth# Metro Population growth, age 20-34

Cumulative 2010-2014

1 Colorado Springs, CO 13.4%

2 Honolulu, HI 13.3%

3 San Antonio, TX 12.7%

4 El Paso, TX 12.0%

5 Orlando, FL 11.2%

6 Denver, CO 10.5%

7 Seattle, WA 10.1%

8 Houston, TX 10.1%

9 Cape Coral-Fort Myers, FL 9.7%

10 North Port-Sarasota-Bradenton, FL 9.5%

Among large metros

data source: U.S. Census Bureau

Millennials live where Gen Xers did

data source: U.S. Census Bureau

What it means

Since demographics explain Millennial housing behaviors, it’s not attitudes

Household formation and homeownership may have permanently shifted later in life

Housing investments must reflect seniors’ preferences and needs

Absent major policy shifts, there will be plenty of demand for suburban homes

Thank you!

@jedkolko

www.jedkolko.com