Changes in lifestage are widely assumed to be the key catalyst for homebuying decisions, especially when considering younger shoppers. Millennials, the largest living generation and those born between 1980 and 2000*, are notorious for delaying life choices like getting married and having kids.
The housing industry has been waiting for years for a full rebound in the homeownership rate among young shoppers. For example, the homeownership rate for those under 35 years old averaged 40.8% in the year 2000, peaked during the housing boom at 43.6% in 2004, and remains depressed at 37.5% today.
With marriage assumed to be the ticket to owning a home, we collected data on top metros across the country to look for commonalities in Millennial homeownership.
As expected, the average homeownership rate for a married Millennial in top metros is 60% compared to 43% for those not married.
Of the markets with the highest share of Millennial homeowners, there’s a large cluster in the Midwest (six of the top ten). Select markets in the Southeast and Northeast also have relatively high rates of ownership.
Five markets show a homeownership rate for married Millennials over 70%: Indianapolis, Greenville, Detroit, Cleveland, and Minneapolis.
The map below highlights that markets that offer relative affordability through a combination of lower-priced homes and quality jobs allow Millennials to follow the more traditional life path similar to their Boomer parents, which includes marriage, buying a home, and having children.
Marriage Struggles To Solve For Affordability
Focusing on changes in lifestage without considering affordability can be misleading though.
The areas with the largest share of married Millennials do not necessarily correspond with the highest homeownership rate for the cohort.
In some markets across the country, marriage is related to a huge jump in ownership rates, while in others, the difference is negligible.
We calculated the spread between married and unmarried Millennial homeownership rates (see table below) and found a clear distinction related to affordability. For example, of the top markets, Cleveland has the largest spread between married and unmarried homeownership rates and has the lowest home price to income ratio** of 1.6, according to Zonda. The markets with the smallest spread are among the most notoriously expensive in the country.
Of the ten markets with the highest home price to income ratio, two challenge the idea that affordability is the sole driver: Portland, where the spread is 24% and Denver with a 21% difference. Both have a home price to income ratio of 4.1. Going past affordability, these outliers force a second set of questions:
Where are the jobs?
Where do people want to live?
What can you get for the price?
Are the homes large enough for a growing family to justify the price?
“These questions force our team to figure out the subtleties of each community we work on to determine how deep the demand is at a given price.” explains our Senior Managing Principal of Advisory, Tim Sullivan.
"Lifestage catalysts like marriage and having children are extremely important but we also have to consider what else drives the purchase decision,"
This research reiterates the need for increased and modified new home offerings, concerted efforts by economic development councils to bring in more high-paying jobs, and that lifestage factors are a part of an even bigger puzzle to analyze demand.