This month, we take a closer look at Millennials and their impact on urban revival. On May 12, 2015, Business Insider published an article The 10 best big cities for educated millennials. Based on research by American Institute for Economic Research, the article ranked destination cities both by the amenities important to Millennials and job prospects. Two of their top ten cities were Minneapolis-St. Paul, Minnesota (#9) and Boston, MA (#3).
It’s been said that Millennials (sometimes known as Generation Y) are causing the great migration back to the inner city. Safely raised by “helicopter” parents in the suburbs, these 18-35 year olds are relocating to America’s cities. Seeking convenience and a connection to others, they have been the driving force behind this phenomenon.
While the Millennials’ impact can be seen, the rehabilitation of America’s inner cities does not happen with a broad brush. Change comes one building, then one neighborhood, then one ZIP code at a time. Sometimes an area gets known for its artist community, other times for food or other attractions. Whatever the impetus, the story is the same: an inner city area that was once perceived as unattractive starts to get redeveloped, people feel safe to explore, move in and experience all the benefits city living has to offer.
As is the case in regional housing trends, inner city real estate markets are impacted by employment opportunities, interest rates, percentage of foreclosures, tax rates, and school districts to name a few. There are also perceptions that can impact these hard facts – “trendy” neighborhoods might sell for above asking just because of a ZIP code, and other areas might be left out of a recovery because of negative perceptions.
Two ZIP Codes
To look at Millennial’s impact we look at two representative ZIP codes: Lyn-Lake area of Minneapolis (55408) and South Boston (02127).
The Lyn-Lake area of Minneapolis (55408) is a vibrant community that embarked on a strategic plan to further engage residents and businesses. South Boston (ZIP 02127) also has seen a transformation over the last few years into a thriving live-play-work space.
A look at housing costs shows both have weathered the housing crash well and are at all-time highs:
Looking at the demographics of the two ZIP codes is telling, with both having large populations of 25 – 30 year olds (Millennials).
As we discussed in our September, 2014 HVF update, Market Trends Across the U.S. – How Economic Restructuring Affects Housing Affordability, metros at differing points in their economic restructuring have different affordability. Smart companies are looking at affordability and moving to where there is a large percentage of the population with a bachelor’s degree or higher. Boston and Minneapolis are #4 and #7 respectively on the list and look well poised for future housing appreciation.
In addition to Boston and Minneapolis, Austin, Denver, New York City, San Francisco, San Jose, Seattle, and Washington, DC are referenced in the Business Insider article and also have been ranked in the most highly educated metros shown on above chart. Interestingly, Denver, San Francisco, San Jose, and Seattle also are listed in our top 10 metro ranking this month. As the article and the research show, educated Millennials are gravitating to cities and we believe this is creating a positive impact on urban revival in many key cities across the country.
CBSA Winners and Losers
Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs to highlight the strongest and weakest metros.
The ranking system is purely objective and is based on directional trends. Each indicator is given a score based on whether the trend is positive, negative or neutral for that series. For example, a declining trend in active listings would be positive, as will be an increasing trend in average price. A composite score for each CBSA is calculated by summing the directional scores of each of its indicators. From the universe of the top 200 CBSAs, we highlight each month the CBSAs which have the highest and lowest composite scores.
The tables below show the individual market indicators that are being used to rank the CBSAs, along with the most recent values and the percent changes. We have color coded each of the indicators to help visualize whether it is moving in a positive (green) or negative (red) direction.
Top 10 CBSAs:
Seattle joins Bellingham, WA in the top ten this month. In addition, Denver, Phoenix and Reno are in the ranks of the top ten, which have been dominated by California metros such as San Jose, San Francisco and Oakland-Hayward-Berkeley. All of the metro areas in the top ten have less than 5 months of remaining inventory with San Francisco having less than 2 months. Also, the foreclosure percentage of sales is well below 10 percent in every market.
Bottom 10 CBSAs:
This month’s bottom ten include several new markets, including Elgin, IL, Kansas City, MO-KS and Memphis, TN-MS-AR, which are plagued by larger foreclosure sales percentages and higher months of remaining inventory. Interestingly, there are only three Florida markets in the bottom ten this month and all three appear to have improvements in active home price percentages.