As a follow-up to Deciphering the Code of the Millennials Part I about where millennials are currently buying homes, this blog will share perspectives on where millennials will purchase homes in the future based on data from a recent CoreLogic research study. According to CoreLogic analysis, millennials are most likely to buy homes in metropolitan areas with an improving economy. More specifically, markets that have a lower unemployment rate, lower foreclosures/delinquency rates and a higher year-over-year GDP increase are the most attractive to this younger demographic.
The research is primarily based on CoreLogic’s recently launched Propensity to Purchase model. Each model produces a score that predicts the likelihood, or propensity, for an individual to obtain a new purchase mortgage within six months. CoreLogic applied a Propensity to Purchase score to all homes that have a member of the household who is in the millennial age range. Aggregated propensity information was then derived at the county level as shown in Figure 1. The heatmap in Figure 1 shows the counties that have the highest likelihood of millennial purchases (dark orange) and those counties with the lowest likelihood (light yellow). The top ten ranking counties are in green and the bottom ten ranking counties are in blue.
The propensity range is evenly distributed across the U.S. with a few exceptions. Colorado and Virginia cover 50 percent of the top ten markets, and a majority of the bottom ten markets is in northeast and southeast regions. Figure 2 shows the top and bottom ten counties in which millennials are likely to purchase homes in the next six months. The left two columns are the top ten and the right two columns are the bottom ten. The rankings are listed from highest on top to lowest on bottom.
CoreLogic also analyzed over 70 characteristics to determine the significant discriminators in terms of separating top markets from bottom markets. A majority of the characteristics suggest that millennials are more likely to buy in counties that have a strong and prospering economy. Additionally, millennials are more likely to buy where they are making more money indicating that areas with an improving job market are where this demographic is more inclined to buy.
Part I of this blog discussed where millennials are currently purchasing homes, which is in counties that have a growing job market as well as affordable housing. According to the data from the CoreLogic propensity models, there will be a shift in where millennials will purchase homes in the next six months. The shift will move from cheaper areas that border the improving counties to the heart of the improving counties in which the housing market is more expensive. It is possible that this shift is already happening, but we are not seeing the corresponding numbers because of a reduced number of millennials who can afford to purchase homes that are more expensive. The data that established millennials are purchasing where they can afford is based on the number of millennials who have applied for mortgages. The propensity model is based on potential homebuyers. It could be the case that there are more millennials with the desire to purchase a home in unaffordable areas than in affordable areas. This suggests the highest demand among millennials is for cheaper housing in counties with improving economies. If this is true then we will begin to see an increased gentrification effect in more affordable neighborhoods within counties that are typically more expensive. Most likely, this gentrification trend will have a “hipster” subculture contributed to the millennial generation.
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