It’s 2018 — denim and nostalgia television are back and so are the suburbs, it seems.
56% of young adults aged 25-39 say buying a home with plenty of space is important, according to a recent Zillow survey. Space is less important to older homebuyers, with just 42% of Generation-X respondents and 35% of Baby Boomers saying a large home was important in their home search.
Until recently, young adults were more interested in living near the high paying jobs and cultural amenities found in California’s urban centers. But this shift is perfectly sensible, as Millennials — also called Generation Y — are finally beginning to settle down and form families, which requires more space than allowed by the typical urban apartments and condominiums this generation is used to.
As more young adults enter the homebuying market, this trend is accelerating in California. This demographic had a rough start to homeownership. Many were just starting their careers when the 2008 recession and financial crisis hit. During the long recovery, Millennials saw their incomes stunted, unable to save up for down payments as previous generations had done. All the while, home prices and rents continued to accelerate as the recovery heated up.
In 2018, ten years out from the recession, this generation is finally making a showing in the housing market. But now that they’re ready to buy, they are faced with low inventory and high prices in California’s urban cores. They are finding that competition is less fierce, and space is more abundant, in the suburbs.
Millennials, meet Baby Boomers
Lucky for Millennials, their foray into homeownership coincides with the retirement of their parents’ generation, Baby Boomers.
Three-out-of-four individuals over the age of 65 are homeowners in California as of 2016, according to the U.S. Census. Most of these retirees will want to remain homeowners in retirement, minus the upkeep required by their suburban estates. Some will move out of state to low-cost areas like Arizona, Nevada and even Florida. Others will make the savvy decision to forego their suburban dwellings for low-maintenance condos closer to city centers and services — condos previously inhabited by Millennials, before they went looking for more space.
In some sense, retirees will simply swap housing with Millennials in what will be the Great Convergence. This demographic-fueled wave of home sales is expected to peak around 2020-2021.
Every part of the state is different. To see housing data and forecast trends in your region, check out first tuesday’s regional housing indicators.