Jed Kolko: Millennials Are NOT as Urban as We Think

April 8, 2015 | Candy Evans | | Real Estate Trends

Light Farms

Or as urban as we are led to believe. Jed Kolko is the chief economist at Trulia. I’ve heard him speak a few times, even had drinks with him at NAREE (National Assn of Real estate Editors) events. I mentioned this to him last time we talked — that I really wondered if the case for millennials being the most urban generation ever was being overstated. For one, the only millennials who can truly afford to be “urbanites” in cities like New York City, Washington DC and San Francisco, are millennials whose parents are subsidizing their living in those uber expensive cities. And while there are plenty of those thanks to the explosion of wealth in this country while these kiddos were growing up, there are many kids who come out of school saddled with three-figure college debt. Many millennials had a tough time finding a job during the recession, when they graduated. That college debt — some of it not for tuition, but trips and study abroad programs — makes it harder to pay rent or get a mortgage, if they want to buy. In California, kids starting out on $30k annually did what my son did: share a house with others, because rents are too high on starter salaries. Homeowners will jam 6 to 10 kids in a house, even turning the living and dining rooms into bedrooms. Now my kids live in an urban California environment that they are itching to escape to have a larger yard and less congestion.

The Urban Land Institute also says that this generation of kiddos is marrying later and delaying child-bearing longer than previous generations. And I thought I took forever! I can confirm that women are waiting longer to have their children, I’ve read this in my husband’s OB/GYN literature. You don’t really get the yen to move to the burbs until the kiddos arrive, keep you up sleepless for a few years, and then when they hit school age you think, gee, we really need more space, a yard with a fence, and a way to make life easier.

Jeb Kolko

Employment trends have also changed: more millennials are self-employed — 27% — and while many young mothers return to the work force, a good number work from home part-time after the baby comes. My children, for example, are finding that paying day-care or full-time nanny wages eats up almost the entire amount of mom’s income with state (California), and income taxes and now higher health-care costs.

Here are interesting statistics on Millennials from various resources:

There are about 79 million millennials in the U.S., versus the 48 million Generation Xers (born between 1965 and 1980). (ComScore)

Millennials will make up 50 percent of the U.S. workforce by 2030. (Bureau of Labor Statistics)

23 percent of companies reported having heavy contact with parents of millennial employees. (Collegiate Employment Research Institute) Not their fault we coddle

4 percent of employers involved reported parents attended their children’s job interviews. (CERI) You’ve got to be joking…

31 percent of employers involved reported parents submitted resumes on behalf of their offspring. (CERI) No way…that’s what we get for writing those term papers!

27 percent of millennials are self-employed. (The Millennial Generation Research Review) And work from home or shared office space

80 percent of millennials sleep with their phones next to their beds. (The Millennial Generation Research Review) Duh.

Millennials send about 20 texts per day. (Pew Social Trends) That’s all?

15 percent of millennials, versus 7 percent of Gen Xers at a similar stage of life, said having a high-paying career is important. (The Millennial Generation Research Review)

The purchasing power of millennials is estimated to be $170 billion per year. (ComScore)

Millennial unemployment rate in January 2013 increased to the highest rate recorded for this demographic to 13.1 percent versus the national average of 7.1 percent. (U.S. Department of Labor.) See?

56 percent of millennials think technology helps people use their time more efficiently. (Pew Social Trends)

14 percent of millennials use Twitter. (Pew Social Trends) Not sure I buy this

31 percent of millennials said they earn enough money to lead the kind of life they want, versus 46 percent of Gen Xers. (Pew Social Trends) They buy used high-quality items on Facebook re-sale sites

41 percent of millennials have no landline at home and rely on their cellphones for communication. (Pew Social Trends) Ditto

Here’s what Realtors tell me about millennials: they are extremely socially conscious, they like to buy homes turn key, all the work done, and they generally like newer home amenities though they may love older homes with charm and character. So they love Hollywood Heights and the Tudors of M Streets, two of Dallas’ most sizzling neighborhoods, but they still want the bathrooms inside all redone BEFORE they move in.

Sound familiar?

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So now let’s translate this to urban versus suburban living. Turns out, Jed tells us, those millennials living in hyper urban areas are all college educated — see? These kids comes from higher net worth families who can cushion their cost of living.

According to the most recent detailed census data available, covering the years 2009 to 2013, 25- to 34-year-olds are slightly less likely to live in urban neighborhoods than 25- to 34-year-olds in 2000. That share dropped 0.3 percentage points — a 1 percent decline — as the chart shows.¹

To see the Brooklyn — or Logan Circle (Washington), or LoDo (Denver), or downtown Los Angeles — effect, look only at 25- to 34-year-olds² with at least a bachelor’s degree and at the subset of urban neighborhoods with the highest population density — the hyper-urban neighborhoods. The share of college-educated millennials living in these city neighborhoods rose 1.7 percentage points, a 17 percent increase — a big jump. But only 32 percent of 25- to 34-year-olds have bachelor’s degrees. The two-thirds of millennials who lack a bachelor’s degree are becoming less likely to live in urban neighborhoods (-8 percent) and even less so in hyper-urban neighborhoods (-10 percent).³

Does that mean that millennials who live in hyper-urban cities are smarter?

Jed says that the “movement of college-educated millennials toward high-density neighborhoods is less dramatic than it appears.

First is that 25- to 34-year-olds with bachelor’s degrees are a growing share of the adult population, up from 5.2 percent of all adults in 2000 to 5.6 percent in 2013. Second is that older adults — especially those 65 and older — are notably less likely to live in urban neighborhoods now than in 2000, as they stay longer in single-family homes. So the adult you randomly bump into in a hyper-urban neighborhood is 30 percent more likely to be a college-educated 25- to 34-year-old now than a decade ago (or 50 percent more likely if you’re in Brooklyn), but the odds that a randomly selected college-educated 25- to 34-year-old American lives in a hyper-urban neighborhood is up only 17 percent. The composition of cities is changing more than the behaviors of college-educated young adults are.

Then he gets into the other obvi reasons that influence millennial s to putting off home purchases — later marriage, later kids, — but also race and ethnicity. The latter I don’t understand, unless to mean that if their parents were more likely to be hyper urban, and lease, would their children be as well?

All this ties into what the young Millennial developers of Phillips Creek Ranch and Light Farms tell me: they cannot churn land and build fast enough to accommodate demand.

So what are you seeing? Are Millennials more urban than suburban, or is the jury still out…