With the more than 92 million millennials headed to the age bracket of prime spending, the group’s money and home ownership decisions will, no doubt, have an effect on the economy. Born between 1980 and 2000, millennials grew up in an uncertain economy, and therefore may be more cautious in their financial decisions.
However, the job market is something that will guide these folks in some of their decisions, such as where to accept a job, where to move and whether to rent or own. Here are some of the factors that come into play when it comes to millennials’ housing decisions.
So long, metropolis
Though for years young people fresh out of college have moved to major U.S. cities like New York City or Los Angeles, today they are thinking outside of the norm and opting for cities that are a bit smaller, but no less promising.
The reason is cost of living.
According to Society for Human Resource Management, students graduating with degrees in liberal arts and humanities averaged a $36,000 annual salary (in 2014) while those in business and engineering were a bit higher at $49,000 and $64,000 respectively. The average salary out of college was just over $45,000.
Not bad. However, considering the cost of living in New York and Los Angeles, most of that salary gets eaten up by rent. Renting a one-bedroom apartment in New York City costs between $2,000 and $3,000 monthly (and typically leans toward the latter). And in Los Angeles, it’s only a smidge lower. Top that with student loan payments, utilities, food and everyday expenses, there’s not a whole lot left.
Where they’re headed
According to BizJournals.com, many millennials are deeming it lucrative to move to Houston. Houston ranks in the top 10 cities across the country with the quickest growing millennial population, with the numbers increasing 25 percent over the past decade. The group makes up nearly a quarter of Houston’s population.
Cost of living is cheaper and job opportunities are abundant. In fact, the city has added more than 100,000 new jobs each year, which has attracted just-graduated millennials, particularly those interested in energy and health-care careers.
Though there’s an excellent housing market in Houston, millennials are foregoing buying a home in the city in favor of renting upscale apartments in desired areas of the city, due to very affordable rent prices.
In addition to Houston, experts say millennials are also moving to other cities like Austin, Seattle, Columbus, Tucson and Atlanta due to promising job growth projection, affordable rent and housing prices, an active nightlife and entertainment scene and more.
Because millennials are marrying later in life than generations before, they are holding off on purchasing homes. Lifestyle also plays a factor in this decision, like high student loan debt and debt-to-income ratio. Though not an immediate priority, when millennials do choose to buy a home, they may settle for something scaled-down, as they deem spending money on things like travel and even entrepreneurship more important.