With sales to first-time home buyers down nationwide, why is it that millennials in Boston, Pittsburgh and Washington are leading the charge back to homeownership?
According to the National Association of Realtors, first-time buyers represented just 30 percent of the existing home market in February, a figure down substantially from the traditional norm of 40 percent or so.
However, the story is very different in Boston, Pittsburgh and Washington. According to new LendingTree research, millennials in these cities represent roughly half the local market. But why three cities in the northeast? Isn’t the country migrating south?
The Census Bureau estimates that the millennial population – those 34 and under – number 83.1 million people, about a quarter of the total national population. On average, 41.4 percent of all mortgage requests through LendingTree come from applicants under 35 years old. The average age for a home buyer in that age group is 29. Their mortgage loans average $220,949 and their down payments $32,760.
“The under-35 crowd had been, for some years, hesitant to enter the housing market, but we’re seeing that start to shift,” said Doug Lebda, CEO of LendingTree. “The data all points to the fact that millennials are increasingly eager to own rather than rent, and even the incredibly high real estate prices in some markets don’t necessarily deter them.”
In fact, Boston, Pittsburgh and Washington make a lot of sense for millennials because in a knowledge economy they offer a number of attractions.
What Boston, Pittsburgh and Washington Have to Offer
First, each area is a major academic center. This means there is a population of young people drawn to these cities for the educational opportunities they represent. Once in the area, strong local job markets create incentives to stay.
Second, while we usually think of Silicon Valley as the nation’s leading tech center, there are enormous opportunities in the Northeast. For instance, according to Money magazine, graduates from Cambridge-based MIT have early career earnings of $72,500 versus $64,400 from Stanford – and the cost of an MIT degree is almost $12,000 less.
Third, while we usually think of Washington, DC in terms of government buildings and the nightly news, it’s also a major computing, communications and medical research center. For instance, the CIA (computers) is based in McLean, VA while the National Security Agency (computers, communications) is located at Fort Meade, MD.
Montgomery County, MD – which shares a subway system with DC – is home to the National Institutes of Health, the Food and Drug Administration, and the Walter Reed National Military Medical Center. These massive institutions are serviced by countless contractors and consultants which means there are plenty of highly-paid job opportunities. Moreover, the DC area is saturated with government jobs. These jobs offer good pay, exceptional benefits and cannot be shipped overseas.
Lastly, any list of the best technology centers in the world is likely to include Stanford, MIT, the Israel Institute of Technology (the Technion), the Indian Institute of Technology and Pittsburgh-based Carnegie Mellon.
Carnegie Mellon ranks first among U.S. universities in terms of start-ups per research dollar and – according to U.S. News & World Report – it has the best computer science program in the U.S. While the school has campuses in Silicon Valley and Qatar, its central location is in Pittsburgh, an industrial city now emerging as a revitalized tech hub.
One of the city’s great attractions is a large stock of affordable homes. While the typical San Jose home lists for $769,000, the average in Pittsburgh is just $154,000.
So while others are migrating South, millennials in big numbers are going where the jobs are, and for many of them that means three old-line cities in the Northeast.
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