Renter profiles: Millennials and knowledge workers

real estate investing renter profiles - millennials and knowledge workers
by Team Stessa, posted in Newsletter

Last week we spoke about the important senior renter demographic, and this week news shifted to another critical group for real estate investors: millennials! To begin, the National Association of Realtors released the Most Popular Areas for Millennials report, which analyzed employment gains, population trends, income levels and housing conditions in 100 metros to identify the best purchase markets for millennials. So where are millennials moving to the most according to the report?

  1. Bakersfield, CA
  2. Denver, CO
  3. Durham, NC
  4. El Paso, TX
  5. Grand Rapids, MI
  6. Madison, WI
  7. Oklahoma, OK
  8. Omaha, NE-IA
  9. Salt Lake City, UT
  10. Seattle, WA

Real estate investing — renter profiles for investors

Source: NAR

Picking up on this news was Diana Olick of CNBC, highlighting the fact that millennials are moving more to secondary markets as opposed to larger metros. “Based on average income, millennials in these markets can afford to buy 1 out of 4 homes listed for sale. In Oklahoma City, they can afford 30%. By comparison, millennials can afford just 10% of the homes in Dallas, 13% in Boston and barely 2% in San Diego.”

Another major trend is the rise of remote work for knowledge workers. Indeed, a study released last week by Citrix found that “Overall, 70% of US workers, who are not already living in a rural county or broader metro area, would be very likely or fairly likely to consider relocating to one of these areas if they knew their professional life wouldn’t suffer.” The major reasons for this willingness to live in a more rural setting are as follows:

Investing in these top US cities — risk vs reward

Source: Citrix

As real estate investors, we need to understand the growing desire of millennials to live in secondary and tertiary markets, as well as the growing desire among knowledge workers to work remotely, even in rural settings.

Lists: Investing hotspots, and cooling markets

Topping much of the news this week were lists of top places. Ellen Paris of Forbes reported on Compound’s report showing the top 10 cities for real estate investors to consider when factoring in risk versus reward. Compound measures the risk in a market by calculating The Sharpe Ratio of an MSA’s average home price.

Why renters are choosing to increasingly live in rural areas

Source: Forbes

On the bottom of the list, the worst cities to invest in according to Compound, San Jose finished last, as well as Indianapolis, Cincinnati, Kansas City, Charlotte, Dallas-Fort Worth, Columbus, Atlanta, San Antonio, Austin, and Cleveland.

Katie West of Think Realty reported on the top real estate markets with the greatest seller gains in Q1 of 2019. “U.S. homeowners who sold their homes in the first quarter of 2019 realized an average home price gain since purchase of $57,500, down from an average gain of $60,000 in the fourth quarter of 2018, but still up from an average gain of $56,733 in the first quarter of 2018.” The markets topping the dollar gains for sellers were:

  • San Jose, California ($479,500 gain)
  • San Francisco ($336,000)
  • Los Angeles ($217,000)
  • Oxnard ($178,000)
  • Honolulu, Hawaii ($171,563)

Chloe Taylor of CNBC covered a Resilient Cities Index report by Savills highlighting the top 10 international cities that are “still relatively untapped, despite being the most likely to see economic growth amid global disruption in the coming decades.” Those making this list from the U.S. were: New York, Chicago, L.A., Washington D.C., Dallas, and San Francisco.

#LocalNews: California, NY, and Austin

Javier Panzar and Sarah Parvini of the Los Angeles Times reported this week that population growth in California in 2018 was the slowest in state history, “underscoring shifting immigration patterns, declining birthrates and economic strains that are making it harder for some to afford living here.”

Sam Raskin of Curbed New York reported on the tenants and landlords who debated New York’s expiring rent laws at a packed assembly hearing last week. The laws governing NY’s one million rent-regulated apartments expires in June, with landlord groups wanting less regulation and tenants wanting more.

John Egan of Culture Map Austin reported that “nearly 60 percent of ZIP codes in the Austin area had shifted in favor of homebuyers versus sellers compared with a year earlier.” Austin is now more of a buyer’s than a seller’s market.