SALT LAKE CITY — While the Beehive State can boast one of the most robust economies and housing markets in the country, that strength has created a challenging circumstance for young would-be homebuyers, a new report says.
According to California-based realtor.com, a combination of low housing inventory, escalating real estate prices and increasing demand have made San Jose, California; Seattle; Salt Lake City; Minneapolis; and Omaha, Nebraska, the toughest areas in the country for prospective millennial homebuyers this spring.
The company researched the 60 top metro areas with large populations of older millennial markets. Those cities were then ranked based on inventory availability and affordability.
While the top two markets could be considered among "the usual suspects," explained Javier Vivas, director of economic research for realtor.com, the addition of Utah’s largest metropolitan city as one of the "hot markets" can be attributed to the area’s prevailing robust economic conditions.
"Especially in the last year, you look at the economy growing at about two times the pace of the U.S. average," he said. "The other part is the city itself is becoming a place where people actually want to put down roots. That’s where we’re seeing some of that millennial demand build up in the last 18 months."
He added that the area’s lifestyle options are helping to make the city more attractive to the millennial population, something that should continue for the foreseeable future.
"Knowing that the economy will be quite robust for the next year or two, barring anything abnormal, Salt Lake should continue to pursue that path of growth," he said.
Each market on the list has attracted large numbers of 25- to 34-year-olds with their strong economies and well-paying job prospects, a news release stated. As a result, millennials make up a higher share of the population — at 14.6 percent compared to 13.4 percent nationally. Household income among millennials in the top five locales was also much higher at roughly $79,000 in comparison to the U.S. median of $59,800, the report stated.
Utah is one of the fastest-growing states in the nation, but a shortage of housing inventory and rising home prices make it increasingly difficult for prospective home buyers to find affordable housing.
Search data indicated that millennials in those markets were very interested in purchasing a home, accounting for 25 percent of views during the first quarter of the year — the highest of any age group in the study. However, low inventory levels and high prices are making it tough for these would-be buyers, Vivas said.
Nationally, the report showed inventory is down 35 percent from spring 2012 and active listings are 8 percent below this time last year, but list prices are up 8 percent. The housing shortage is even acuter in the top five metros, with supply is nearly three times lower than the rest of the country, the report stated. To compound the problem, listings in those cities are selling faster at higher prices.
The median list price in San Jose was $1,244,000, compared to $280,000 for the U.S. overall, Vivas said. On average, San Jose millennials earned $109,800 annually compared to the median U.S. millennial salary of $59,800. The millennial age group comprises 14.3 percent of the total population in San Jose and accounts for 24.1 percent of total realtor.com page views in the area.
In the second-ranked city in the report, the median list price in Seattle of $553,000 was near twice the national median price. The average millennials earned $78,300 annually while making up 15.4 percent of the area’s total population and accounting for 24.2 percent of total realtor.com page views.
"You look at the economy growing at about two times the pace of the U.S. average. The other part is the city itself is becoming a place where people actually want to put down roots."
In spite of the Emerald City’s already high home prices, many millennials are spending more than $1 million on their first home due to the elevated salaries and high home prices, the released stated.
The median list price in third-ranked Salt Lake City registered at $394,000, with the average millennial earning a $67,800 annual salary. Millennials made up 15.5 percent of the total population in the capital city, accounting for 26 percent of total realtor.com page views, the report stated.
Minneapolis ranked No. 4 with a median list price of $366,000, slightly above the U.S. median list price of $280,000, Vivas said. On average, millennials earn $73,600 annually and constitute 13.9 percent of the total population in Minneapolis metro area and almost 25 percent of total realtor.com page views, the report stated.
The city is relatively affordable, but it’s become more difficult for first-time buyers to find homes under $250,000, he said. When they do, they are often outbid by cash offers from baby boomers, he added.
Utah’s growing economy comes at a cost: As more people move to Utah, apartment prices are rising faster than wages.
Data showed that fifth-ranked Omaha also had a median list price of $283,000, with millennials on average earning $63,500 per year. Millennials made up 13.8 percent of the total population and accounted for 25.9 percent of total realtor.com page views in the area.
Millennials searching for homes under $250,000 are struggling, but boomers purchasing more expensive homes continue to have success closing deals, Vivas noted.
“Millennials want to buy, but record-low inventory is making it extremely difficult,” said Danielle Hale, chief economist for realtor.com. “Our analysis shows millennials are facing challenges in both established markets such as San Jose and Seattle, as well as more recently popular areas like Omaha and Salt Lake City. Despite the difficulties, first-timers are optimistic and more than willing to weather the challenges this spring has to offer.”