Millennials have been priced out of many markets across the US, it is what it is. But every cloud has a silver lining and sky-high prices! In primary markets like SF, Boston, and Seattle, there has been a tremendous groundswell of interest in non-gateway cities – places like Huntsville, Akron, and Indianapolis. Current demographic trends show that millennials are leaving Tier-1 cities in droves, even before the urban exodus caused by the COVID-19 pandemic.
Over the past five years, close to 40 million Americans moved, according to data from the Joint Center for Housing Studies at Harvard University. Much of this relocation comes in the form of younger people moving to traditionally overlooked MSAs, in particular those with fewer than 1 million people. These “small” MSAs have seen tremendous growth in net domestic migration, which is the mirror-opposite of the same trend in highly populated MSAs, which again, are losing residents in statistically significant numbers.
There are several reasons for this sea-change in millennial interest in high cost of living urban areas like the Boston MSA, San Francisco Bay Area, NYC, and other expensive regions from coast to coast. Historically, migration patterns in the United States have been driven by several factors, including:
-Better employment opportunities
-Crowding and competition for space in already settled areas
-Tax rates in primary cities
Employment Opportunities and Cost of Living
Many of the benefits found in primary urban centers can also be found in non-gateway markets at a substantially reduced cost. While workers tend to seek out and congregate in areas with high job growth, it can also lead to more opportunities within a given area as businesses expand their operations. Additionally, the lower costs of housing, goods and services, childcare, and other needs means that millennial dollars stretch further. This is particularly valuable for a generation saddled with onerous student loans and other financial obligations.
Starting a Family
Of course, millennials are not solely seeking out these areas because of employment. It’s not like there are job shortages in Boston or NYC. A less quantifiable, but equally important factor is their desire to start families and build their lives – something that is out of reach for many millennials in expensive coastal areas where “starter” homes begin in the high 6-figures and just go up from there. While some millennials may be able to afford a 1 or 2 bedroom condo in a dense cityscape, finding a home in a safe neighborhood with good schools and a yard is simply unattainable for many.
We’re in the business of locating and executing on opportunities in overlooked markets with growth potential – diamonds in the rough, if you will. We’ve found many of these diamonds in and around the South and Southeast, in cities like Huntsville, Tuscaloosa, Birmingham, and Chattanooga. These cities have strong employment opportunities, but beyond that, they also have a quality of life that appeals to millennials, particularly those that are affordable, and well-suited to raising a family.
As demonstrated above, the trends are clear. More and more millennials will likely continue to leave major population centers for secondary cities. We want our investors to be ahead of the game when it comes to these changes, and to assist them in taking advantage of this new day in American real estate.