Which markets are millennials flocking to, and which builders already control the market?
What if Houston becomes less important to builders as boomers age in place? It might be a few years before markets shift to cater more to millennial home buyers, but most indicators of where millennials choose to live shows Austin will be the most important Texas city for builders whose core target may be younger buyers.
Last month, Forbes ranked the 25 best cities for millennials, choosing their top destinations based on the percent of the population between 25 and 34, percent of millennial newcomers, job prospects, and median rent. Forbes also considered other factors that led recent college graduates to these cities such as ease of commuting and proximity to attractions like bars and coffee shops. The list ranks Cambridge, Mass., at No. 1, and Tempe, Az., at number 25. The millennial magnets are scattered nationwide and range in population density from smaller cities like Madison, Wis., to Brooklyn, N.Y.
Missing from the list are the top two new home markets—Houston and Dallas. The two are often left off rankings of millennial magnets. If Gen-Y flocks to these cities in search of jobs and stay put into their mid to late 30s, even with delayed household formation, these metros might prove more important to builders than their current favorite retiree magnets. Some cities on the list like Portland and Austin are already among the largest new home markets with big builder influence, but many cities millennials head to have much older housing stock and smaller builders close the most new homes.
To look at the top builders in these best cities for millennials, we first widened our lens to accommodate larger housing markets. Even if millennials stay put in the metros they’ve chosen to rent in after college, they might decide to buy in a suburb of that city or settle in a less dense neighborhood. This left us with 16 metro areas instead of 25 cities based on, for example, consolidating Brooklyn, Manhattan, Queens, and Jersey City all into the New York Metro market. It also added additional zip codes to smaller cities, expanding Santa Clara to the San Jose metro, for example. Looking at all 16 markets combined over the last four quarters using data from Metrostudy, here are the top 10 builders in the best metros for millennials:
While this list has no shortage of the production builders still making most of their money in boomer magnets across the country, zooming in on each of the 16 metros shows that some smaller builders reign in cities that might grow their housing markets as millennials look to buy homes. DR Horton is the top closing builder over the last year in four of them, but regional builders like Lombardo Companies in Ann Arbor and Bigelow Homes in Rochester rule their millennial metro. While this list has no shortage of the production builders still making most of their money in boomer magnets across the country, zooming in on each of the 16 metros shows that some smaller builders reign in cities that might grow their housing markets as millennials look to buy homes. DR Horton is the top closing builder over the last year in four of them, but regional builders like Lombardo Companies in Ann Arbor and Bigelow Homes in Rochester rule their millennial metro.
