Insights and Trends - Residential Real Estate Market: United States
Three current trends in the U.S. residential real estate market in large cities are Millennials leaving downtowns for surrounding areas, rising home prices, and single-family rental homes.
Three Current Trends in the U.S. Residential Real Estate Market in Large Cities
1. Millennials Leaving Cities for Surrounding Areas
- Though big cities have been a magnet for Millennials, this generation is currently exiting big cities and choosing to live in nearby areas outside of the city.
- In 2018, industry source RentCafe "ranked zip codes in the 30 biggest U.S. cities by the highest increases in millennial population." Of the zip codes that ranked in the top 20, just four were downtown areas. All the other zip codes were near downtown areas or surrounding neighborhoods outside of those big cities.
- The aforementioned study also found that of the "top 20 zip codes with the largest millennial population," none were downtown areas. Rather, they were either near-downtown areas or surrounding neighborhoods outside of those big cities. As an example, though New York accounts for nine of those "top 20 zip codes," none of the nine were located in Manhattan (but rather were mainly Queens and Brooklyn).
- In 2018, "[l]arge U.S. cities lost tens of thousands of millennial and younger Gen X residents" per Census data. According to the Wall Stret Journal, most of those leaving big cities in the U.S. relocate to either "nearby suburbs or the suburbs of other metro areas."
- The Wall Street Journal reported that 2018 marked "the fourth consecutive year that big cities saw this population of young adults [ages 25-39] shrink." Cities that lost a substantial quantity of people in that age bracket included Chicago, New York City, and San Francisco, among others.
- In 2018, the number of people between the ages of 25 and 39 that New York City lost totaled nearly 38,000. That exodus was approximately twice as many that the city "experienced each of the previous three years."
- This is a trend because it has been expressly described as such by numerous reputable sources, including the Wall Street Journal and CNBC, among others.
- As was previously stated above, major cities where this trend has been readily apparent include Chicago, New York City, and San Francisco.
- The main factors driving this trend are the quality of schools and expensive housing costs.
- Millennials are also increasingly becoming homeowners, which is yet another factor contributing to this trend.
2. Rising Home Prices
- The rising prices of homes is another current trend in the U.S. residential real estate market in large cities.
- In 2019, housing prices rose by 3.7%.
- Per research from Standard and Poor's, housing prices increased in 2018 in "all 20 major U.S. cities."
- For 2019, housing prices were projected to increase by 4.3%, nearly keeping pace with 2018's increase rate of 4.8%.
- Housing prices are expected to continue increasing in 2020, as CoreLogic's Home Price Index Forecast projects that come May 2020, home prices will increase by 5.6%. Another industry source also projects home prices to increase in 2020, albeit at a lower clip of 3.6%.
- This is a trend because it has been expressly described as such by at least three, credible industry sources (Global Property Guide, Mashvisor, and Kiplinger).
- This trend is illustrated in the major U.S. cities of Atlanta, Boston, Los Angeles, Chicago, and New York, which saw home prices increase in 2018 by 6.2%, 5.59%, 4.44%, 3.11%, and 3.5% respectively.
- Factors driving this trend include "the shortage of affordable homes in the U.S." which has resulted, in part, from builders' focus on more-upscale housing developments.
3. Single-Family Rental Homes
- Single-family rental homes is a popular trend in large U.S. cities.
- According to industry source Roofstock, "[i]n the top 20 largest markets, SFR [single-family rental] makes up 15-30% of all single family homes and between 20-50% of all rental properties. SFR has grown tremendously and much of that has been driven by significant growth in the top markets."
- While this is a current trend, it's equally a future trend. As one source stated, "[t]he rise of the single family rental asset is one of the hottest residential real estate trends that is showing no signs of slowing down." The number of single-family housing units in the U.S. currently totals approximately 16 million, which is projected to grow substantially by 2030 to a whopping 29 million.
- Nearly half (45%) of the single-family homes being rented in the U.S. are owned by landlords who only possess one such unit.
- Major U.S. cities where this trend is readily apparent include Chicago, Atlanta, Dallas, Denver, and Miami, among others.
- Factor driving this trend are the lack of affordable housing available for sale and builders' focus on developing more-upscale housing due to expensive labor, materials, and land costs.
To identify current trends in the U.S. residential real estate market in large cities, we reviewed articles about the state of the market published by reputable sources such as Forbes and the Wall Street Journal. We specifically focused on information specific to large markets in the U.S., as was requested. We ensured that each trend we included is indeed a trend by finding it expressly described as such by one or more additional, credible sources. To further demonstrate the pervasiveness of these trends within the U.S. residential real estate market in large cities, we included the supporting data we found throughout our research, which clearly demonstrates the magnitude of these trends. Lastly, all the trends we included are current trends, as was requested.