Millennials Are on the Move
New data shows Millennials are moving to new cities and states where the grass is greener. It’s reshaping some rental markets and creating opportunity for multifamily owners and managers.
While overall migration is at an all time low, Millennials face employment and cost of living pressures. They’re seeking greener pastures in specific cities and states regardless of macrotrends.
This migration will affect local economies, new apartment construction, and local rent prices. Should you invest in rental properties in 2019 knowing this?
NAR Report on Renter Migration
The National Association of Realtors and Governing.com track renters and migration trends. These insights and reports are valuable for investors and property management companies. And they’re insightful for property managers and owners who need to target the best tenants and get their renting value proposition right.
When people move, they’re suddenly freed from old constraints. This is when you can attract them with a unique offer. With the stationary renters, that value proposition might fall on deaf ears.
Career and Cost of Living Underpinning Migration
Most local economies are healthy in 2019 so there is less need for most Americans to move for employment reasons.
However, the cost of living in places like New York, Los Angeles, San Jose, San Francisco for instance is pushing people inland to less expensive regions.
The largest demographic segment on the move are those between 21 and 39 years age. As it turns, a good number are moving from areas of high cost living (high rents) to more affordable zones. Millennials are also moving to get better jobs or launch a career.
Here’s the major migration statistics from 2018:
Domestic migration away from the Northeast. Screenshot courtesy of governing.com
NAR: migration numbers for 2018. Screenshot courtesy of nar.realtor.
As it turns out, the Trump era economy seems to be creating more jobs in the US heartland states. And it might not be enough to stem the tide. Because Millennials are heading south and west, to Florida and Texas. Huge numbers of people moved away from Illinois, Ohio, Pennsylvania, California, and Connecticut. And Arizona, Nevada, Florida, North Carolina, Washington and Colorado are picking up new residents.
NAR’s US Migration Report
According to NAR, in 2018, the top 5 cities they’re going to are: Madison Wisconsin, Grand Rapids Michigan, Omaha Nebraska, Durham North Carolina and Seattle Washington. Even in down regions, some cities are beacons of hope for migrants. Seattle might be a no-brainer, but isn’t it weird that these other cities are actually drawing Millennials?
See the full NAR millennial migration report.
Governing.com reports a big exodus from the Northeast states. They say an average of 200,000 people are moving out of the region in a recent 3 year period. During 2017/2018, the region lost 352,000 people.
Buyers and Renters
We can segment these Millennial movers into two groups: buyers and renters. Some will be wrestling with the buy vs rent issue. Some of top 100 cities have affordable housing and since Millennials are making up more of the home buyer market each month across the nation, they are likely buying in these regions. With mortgage rates so low, it’s an amazing time to buy in these cities.
Yet there’s few cities with extra housing for anyone. As Millennials move into town, home prices and apartment prices are likely to climb. This migration of working age people might be a key to prosperity, employment, and rising rental rates in many cities.
Millennial Renters Moving to these Cities
Denver, Grand Rapids, Boston, Buffalo, Chicago, Durham, El Paso, Los Angeles, New Haven, Provo, San Diego, San Francisco, San Jose, Toledo, Syracuse, Honolulu, Richmond, and Pittsburgh are the cities with the highest rates of new Millennials. Of course, in coastal California we know they’ll be renting for sure. But can they pay the going rent prices?
Smaller cities in upper New York state are drawing too although the employment rate is lower.
Of the move and stay Millennials, a purchase of a condo or an apartment rental marks a good opportunity for a Realtor or property manager. Overall however, most are apartment renters and as long as they’re employed, they can be solid and sustainable source rental property income.
Regional Economics and Prices Big Factor
Bakersfield, CA
Lawrence Yun, NAR’s chief economist notes in their report that Millennials are on the move away from Coastal California cities into the inland Empire or even desert areas. The quest for affordable accommodations and homeowners is an obsession for some and paramount for many.
And economists are painting an increasingly optimistic picture for many years ahead. Consumers have been saving, employment is very high, wages are rising, yet inflation is constrained.
Cities such as Bakersfield are very attractive due to rising employment rates (+5%). Yet recent movers are only averaging $36,000 in wages and only 14% of them can afford to buy a home there.
You would think that these young migrants earn significantly less than stay put renters. But that’s not always the case. The new stats show many earn more after they move to another city.
The Quest for a Better Life
Millennials move to enjoy a better standard of living, yet most will likely not be able to buy. They’ll be among the strong demand for rental property in the US for many years to come. Prices of homes are not expected to drop.
The picture for landlords and property managers seems stable. To attract Millennial renters, you need to consider digital property management tools, technology as amenity, cloud based property management software, and new tenant service strategies.
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