Millennials, their baby-boomer parents, and even retirees are keeping demand—and prices—high
Salt Lake City is one of the fastest-growing metropolitan areas in the country. But unlike other booming locales, Salt Lake has a largely homegrown citizenry—locals account for 88% of population growth. "Salt Lake City has a high rate of natural increases," says Robert E. Lang, director of urban affairs and planning at Virginia Polytechnic Institute. "It's a big family-friendly kind of place."
The result is that Salt Lake City has a large and expanding pool of ready home buyers: Millennials, the generation born from the early 1980s to the '90s. Utah, where the Salt Lake environs account for the bulk of the state's residents, is the country's youngest state, with a median age of 28.7 years, compared with 35.3 years for the country as a whole. Raleigh, San Antonio, and Colorado Springs also have youthful populations, whereas states such as Iowa, North Dakota, and Pennsylvania are aging fast.
The Millennials, aka Generation Y, will be one of the most powerful demographic forces to enter the housing market in the years to come. By some estimates, they're expected to account for a third of all home buyers by 2015. They're already out in droves, taking advantage of the $8,000 federal tax credit for first-time home buyers. "A huge cohort of first-time buyers will be in the market in the next five years," says David W. Berson, chief economist at PMI Group (PMI), a company that covers banks against borrower default.
Gen Y buyers already have helped prop up the housing market in Salt Lake City. Home prices rose 51% from 2003 through 2008, compared with a roughly 2% drop for the U.S. as a whole. The young buyers' impact is reflected, in part, in the type of sales: The low end of the market, say local real estate agents, accounts for much of the activity, while some multimillion-dollar homes have been sitting vacant for more than a year. Many properties "weren't available to first-time home buyers a year ago," says Kevin Coyle of Stonebrook Real Estate in Salt Lake. "With the downturn, they can now get something they can afford."
When Gen Yers James and Carleigh Naylor got married last October, the couple moved into a dingy basement apartment they rented from an elderly man who lived upstairs. "It wasn't glamorous," says 24-year-old James, who works as a cabinet maker at his father's shop. Earlier this year the young couple decided to buy their first home, a two-bedroom, one-bath on a cul-de-sac on the south side of town. They beat out six offers with a bid of $137,000—still well below the $230,000 median home price in Salt Lake.
Like many first-time buyers, the Naylors are tapping the new government programs designed to spur home sales. Along with the tax credit, they qualified for a federally backed mortgage, which requires less money up front. And a gift from relatives covered their closing costs and down payment. Says James: "We're hoping to use this house as a stepping stone to get us into the next house three or five years from now."
Salt Lake City, Utah
In a state where the median age is 28.7 years, Gen Y's first-time buyers are propping up the home market
2007 MEDIAN HOME PRICE
2008 MEDIAN HOME PRICE
Numbers reflect metropolitan area; Data: Fiserv