A study by Federal Reserve economists Elora Raymond and Jessica Dill found that it’s true that first-time homebuyers prefer to buy in the city. They tend to live closer city centers than existing homeowners who are burying a new home. First-timers buy within an average of 5.8 to 5.9 miles from city centers whereas existing owners prefer 6 to y25 miles.
Where millennials settle could determine whether cities continue to grow, what transportation infrastructure expenditures should be, and whether homebuilders should focus their efforts on multifamily housing in urban locations or traditional single-family homes in the suburbs.
A number of observers have speculated whether the recent surge in millennials living in cities represents a change in preferences or whether it’s simply an artifact of financial constraints—tighter underwriting standards, weak income growth, or larger student debt. Nielsen’s survey of young adults found that millennials prefer the lifestyle afforded by dense urban environments, but the National Association of Homebuilder’s survey of young homebuyers finds that just 10 percent would prefer to live in the city while a whopping 66 percent want to live in the suburbs. Setting preferences aside, others debate whether millennials really are moving to the city. While recent data confirm that young people are moving to the cities at much higher rates than in the 1990s, it’s also true that the raw majority of young people choose the suburbs over the city
Beginning in 2003, younger first-time homebuyers trended towards more central locations. During the 2007–09 recession, the spread between older and younger first-time homebuyers collapsed. After the recession, the spread widened again. It’s difficult to say whether the shift in purchase patterns is the result of financial constraints or changing preferences, but the tendency appears to be for newer and younger homeowners to purchase homes closer to the city center.
The economists, based in the Atlanta Federal Reserve Bank, assembled a data set that allowed them to identify first-time millennial homebuyers and the census tracts where they bought their first homes.
Using this data, they asked if first-time millennial homebuyers are more likely to live near the city center than either existing homeowners or older first-time homebuyers. Finally, they looked at how other factors like creditworthiness and student debt levels appear to influence this decision.
Below, they charted the median distance from the central business district (CBD) of first-time and existing homeowners by age bracket from the years 2001 to 2014. We find that existing homeowners tend to live, on average, 6.3 to 6.5 miles from the city center.
.What this chart cannot tell us is whether the trend that has younger people living closer to the city center reflects uniform preferences or whether this is an artifact of stronger economic growth in denser cities. In other words, is this trend the result of strong home buying in compact cities and weak sales in sprawling metropolises (that is, between cities), or is it the result of all buyers nationwide choosing to move closer to the city center (that is, within cities)?
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http://www.realestateeconomywatch.com/2015/09/do-millennial-buyers-really-prefer-the-city/
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