Six out of 10 millennials say they expect to live in a detached, single-family home within the next five years. This is good news for investors, who can capitalize on this demographic by selling fix and flip properties to first-time homebuyers or renting single-family homes to those who aren’t yet in a position to buy. Of millennials polled by The Demand Institute, 26 percent say they intend to rent a single-family home as their next move, 36 percent say they would buy a single-family home, and 36 percent intend to rent a multifamily dwelling. (Only two percent plan to buy a multifamily dwelling—perhaps the next generation of investors?)
And it’s not just what millennials are planning or expect to do. The demographic is already moving out of cities in droves. According to the most recent U.S. Census Bureau data, 529,000 Americans aged 25 to 29 moved from cities to suburbs in 2014.
But the suburbia of the millennial generation is not what you might expect, explains Steven Davis, CIO and CFO of 5 Arch Funding. “Accustomed to an urban lifestyle and all its conveniences, millennials will seek towns that provide the best of suburban living combined with urban accessibility,” he says.
New Buyers, New Needs
“This trend is resulting in a mini real estate boom in downtown suburban areas,” explains Davis. In the downtown areas of Long Island, NY, and outside of Phoenix, Arizona, for instance, single-family housing developments and condo complexes are thriving. In New York, these developments are close to major transportation hubs, including trains to New York City and bus stations that provide easy cross-town transportation for commuters to popular industrial areas. In Phoenix, there are walkable neighborhoods clustered next to light rail stations.
“Millennials want to be in walking distance to the downtown area,” confirms Joanne Mills, a Realtor in the thriving area of Main Street in Lindenhurst, NY, who says she chose the location specifically because of the migration pattern of first-time homebuyers. “There is definitely more interest in downtown areas, and that increasing interest could drive the price of a home up or at least encourage a faster, easier sale,” she says.
Young and Older Adults Seek Bustling Suburban Areas
Lindenhurst and many other villages close to the Long Island Railroad are thriving, observes Mills. “There’s a sense that if you build it, they will come,” she says.
By “they,” she means millennials and boomers, and by “it,” she means condos, townhouses, and single-family homes within walking distance of restaurants, outdoor cafes, and clothing boutiques. Davis agrees: “The result is the creation of a city atmosphere in the center of suburbia.”
Boomers move to these suburban hubs to stay close to their grandchildren, as well as to enjoy the amenities a condo or townhouse offers. “Many of these spaces are 2,500 square feet,” Mills says. “Older adults want to give up all the hassles and expense of homeownership, but they don’t want to give up the feel of a home. They want a yard for their grandchildren to play and space for the family to gather.”
More Than Convenience
Another aspect of suburban life that downtown areas offer is the opportunity to be part of a close-knit community. “Today’s homebuyers want to be more involved with the people in their community and form relationships,” says Mills. “They grew up as 20-somethings relying on their friends for support, and they are looking for that, wherever they settle down to raise a family.”
Even millennials who do want to stay in the city seek friendlier areas away from the city’s more populated center, says Davis. “For instance, Austin, known for its rapid growth in recent years, has more people moving to the city’s outskirts than to its inner core,” he points out. Austin, Dallas, and Houston all have fewer people living in the city’s older urban districts than they did in 1960.
Main Street living within the city or just outside of it provides the conveniences of urban life with the space—and sometimes lower real estate costs—of the suburbs. Homes farther away from the city’s core tend to be less pricey. In neighborhoods under revitalization, investors can pick up deals and sell the properties quickly to eager buyers.
If you’re looking to invest in a town that’s up and coming, says Davis, investigate what revitalization plans the town has in place, from sprucing up transportation to attracting new businesses to the area. “When you find a home with the features today’s buyers love, be ready with the funds to invest and you can turn a fast profit.”
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