Photo: Robert Clark
Whether they’re buying or renting, more American Millennials are ditching the big city and moving to the suburbs, according to the results of the recent Ernst and Young Millennial Economy 2018 survey.
Since 2016, more Millennials have been moving out of their parents’ house and taking the plunge into home ownership. In fact, the rate of homeownership among younger Millennials (aged 28 to 31) rose 20 percentage points between 2016 and 2018, and 11 percentage points among older Millennials (aged 32 to 36).
Some 38 percent of Millennials are living in the suburbs, either renting or as homeowners, compared to the 37 percent reportedly living in the city. However, among Millennial homeowners, 41 percent are choosing to buy in the suburbs, compared to just 31 percent in urban areas.
The suburbs have a lot to offer first-time buyers, including similar amenities to their larger urban counterparts, but usually at a lower cost to the consumer.
1. More bang for the buck
The national median home price is currently in the vicinity of $275,000, but can be substantially higher in some large urban markets.
Median home values broke $600,000 in California for the first time in 2018 and are over $800,000 in the New York City area. And in Atherton, located in San Mateo County in California — the most expensive zip code in the country — the median home price is $6.7 million.
“Suburban homes tend to have higher prices, but lower prices per square foot. So while suburban homes offer a great deal for buyers who need lots of room, buyers who do not need a lot of space can be pressed to justify the extra costs associated with the additional space,” Aaron Terrazas, a senior economist with Zillow, recently told Livabl.
2. More deals to be had
Lack of inventory has been a constant concern for homebuyers in recent years, as competition grows and prices rise. But inventory is starting to expand.
Compared to last year, there were 3 percent more homes for sale in October nationwide, according to Zillow. Inventory had fallen annually for 44 straight months before posting positive growth.
And, many sellers were cutting prices to make a sale. According to data from the listing site Redfin, a third of homes for sale in October had at least one price drop of more than 1 percent — the highest share of price drops on record since Redfin began tracking this metric in 2010.
3. Greater affordability
At the national level, the typical urban homeowner spends 26.5 percent of their gross income on housing costs, just below the industry accepted 30 percent standard (most financial experts recommend spending no more than 30 percent of income on all housing costs per month).
Meanwhile, the average suburban homeowner spends about 20 percent of their income on housing.
But in some pricier metros, the gap between urban and suburban can be even greater. For example, the typical New Yorker spends 40 percent of their income on housing to live in the Big Apple, compared to nearly 27 percent to live in the suburbs.
Since 2007, urban housing costs have increased by roughly 30 percent, while incomes have only grown 17 percent. Housing costs in more rural areas have risen 16 percent, a figure more closely aligned with Millennials’ median wage growth.
Still, the grass isn’t always greener in the suburbs.
Bucking the trend, life in the ‘burbs turns out to be a bigger financial burden for buyers in about half of the country’s largest markets (17 of the top 35 metros), compared with the costs of urban living. For example, the median home value in Short Hills, NJ is over $1.4 million — well above the $825,000 median value found in nearby New York City.