Millennials Desire a Home in the Suburbs

Filed in Homeownership, Housing Trends by on April 9, 2015 0 Comments

200370957-001A common misconception in the wake of the Great Recession is that Americans, particularly millennials, hold different preferences regarding homeownership and a desire to live in the suburbs. This argument claims that the declining homeownership rates of recent years is a reflection of an increased desire to rent, especially  in more urban locations.

However, as NAHB economist Robert Dietz reports in a recent U.S. News & World Report article, this assertion is at odds with recent survey data that indicate that preferences for homeownership and suburban living remain strong.

The goal of homeownership, alongside education and owning your own business, remains a key feature of the American Dream. The homeownership rate for those under age 35 has fallen from 43.1% to 35.8% from 2004 to 2014, according to Census data. However, this change reflects constraints on housing opportunity rather than a sea change in preferences.

A 2014 survey by Fannie Mae found that 90% of young renters were likely to buy a home at some point in the future. Only 7% of younger renters reported that they were likely to always rent a home. Among current renters, the survey found that the top primary reason for renting (22%) was flexibility, but 21% were renting to prepare financially for homeownership.

Families Prefer Suburban Living

When it comes to the type of housing, consider data from NAHB’s most recent “What Home Buyers Really Want” consumer preference survey. Among millennial prospective home buyers, 75% reported a desire for a single-family detached home, while 11% indicated a preference for a townhome. Only 4% wanted to own a multifamily unit.

The data also indicate an ongoing goal of living in the suburbs. Two-thirds of prospective buyers in the survey wanted to reside in a suburban neighborhood, compared to 10% wanting to own a home in a central city. Nearly a quarter of residents wanted to be outside large metropolitan areas entirely, preferring rural housing.

The 2013 Demand Institute report, examining a slightly younger cohort of both prospective owners and renters, found similar preferences, with 48% preferring the suburbs and 38% wanting more urban locations.

The question as to why these housing preferences persist is linked, in great part, to those major milestones of marriage and children. Clearly, children require more space, both indoors and outdoors. With respect to millennials, the Demand Institute survey found that 64% expected to marry in the next five years and 55% expected to have children.

Neighborhoods Matter as Well

A key reason that the suburbs retain their popularity among home buyers is that a majority of home buyers want easy access to parks, walking trails, playgrounds and outdoor swimming pools, according to the NAHB data.

So while there most likely has been some change among younger home buyers in favor of reduced work-related commutes and walkable neighborhoods, the ongoing preferences for owner-occupied housing outside central cities suggests the dominance of single-family homes will continue, along with growth for townhouses. And as first-time buyers re-engage in the housing market going into 2016, builders will respond by building more energy-efficient homes suitable for entry-level housing.

And to be clear, there’s a time to rent and a time to own. Homeownership works best when attained after a household has achieved financial stability and expects to remain in an area for at least a few years. For this reason, allowing developers to provide new rental housing and maintain the existing housing stock is a key priority for ensuring access to affordable housing.

But on the whole, recent declines in homeownership are not a reflection of preference, but rather of means. For this reason, it is more important than ever to ensure the United States has an effective housing finance system (including the mortgage interest deduction) that does not price out the future generation of home buyers, who like prior generations mostly aspire to own a single-family home in the suburbs.

View the full U.S. News & World Report article.

 

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