Cities may be the top choice for millennials who rent apartments, but young home buyers are moving in droves to the suburbs, where prices are lower and backyards are plentiful.
The share of people 35 or younger who are buying homes in urban areas fell to 17 percent from 21 percent in a 2014 survey, according to a National Association of Realtors study released Wednesday.
While many millennials say they prefer urban living, the rising prices found in downtowns is proving a barrier to buying, said Lawrence Yun, the association’s chief economist. Wealthy empty-nesters and foreign investors are fueling competition for a shrinking supply of listings as developers continue to focus primarily on building high-end condos. Furthermore, young buyers with children want good schools and space for them to play, he said.
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“The story about millennials wanting to live in a city with energy and walkability, that’s still taking place among renters,” Yun said in a telephone interview. “But as they’re going to the owning stage, we are seeing more traditional home buying, which is out in the suburbs.”
People in their 20s and early 30s, already the largest segment of the US home-buying market, are increasingly looking to purchases amid job growth and soaring rents. The group represented 35 percent of buyers, up from 32 percent a year earlier, according to the Realtors’ 2016 Home Buyer and Seller Generational Trends study.
The median income of millennial home buyers in this year’s survey was $77,400, and the typical home they bought had 1,720 square feet and cost $187,400.
Purchases by younger buyers are likely to grow gradually as millennials work through such hurdles as student debt and lack of money for down payments, and start families, something they’re doing later than previous generations did.
The US homeownership rate rose in the second half of 2015 after falling to the lowest level since the 1960s. Apartment rents that rose to a record in the fourth quarter, according to Reis Inc., also are helping drive young people to buy instead of lease.
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The report was based on responses from 6,406 primary-home buyers who made purchases between July 2014 and June 2015.