Although millennials have been slower to buy homes than their parents, most still see home ownership as a top priority as they gain more buying power.
A new study of millennial homebuying by Clever Real Estate ranks Chattanooga among the 20 best cities for such homebuyers. With median home prices in Chattanooga nearly 28% below the U.S. average, Chattanooga and other more affordable markets in the South and Midwest were rated far higher than most expensive markets on the East and West coast.
"Especially in many coastal markets, the cost of housing is just too great, especially for many first-time homebuyers struggling to come up with a down payment and the monthly mortgage payments required in more expensive markets," said Thoms O'Shaughnessy, a research analyst at Clever Real Estate which surveyed millennials and prepared the new city ranking. "The inland cites in the Midwest and South were really the only markets that most millennials can afford."
Surveys of millennials — defined as those between ages 23 and 37 years old — show 84% say that owning a home is part of the "American Dream" and they want to own their own home. Such homebuyers now account for more than 36% of all homebuyers.
The new "Millennial Metric" study ranks Chattanooga as the 19th most attractive city among America's 100 biggest cities and the only city in Tennessee or Georgia among the top 20.
The top ranked cities for millennials, according to the new study, are, in order, are Rochester, New York; Des Moines, Iowa; Omaha, Nebraska, and Dayton, Ohio. The wort cities for millennial homebuyers are Los Angeles, Stockton, San Bernardino and Oxnard, California. Seven out of 10 of the worst cities for millennial homebuyers are in California.
Chattanooga scored the highest for its affordability, but the Scenic City also is popular among many millennials for its outdoor attractions, its favorable climate, the city's ultra-fast internet service and its above-average job growth in recent years.
"A lot of millennials are buying their first home now and they are not so much focused on having a big home as they are having a great lifestyle and many of them are opting to buy duplexes or tri-plexes and living in one of the units and renting out the other unit to help hold down their monthly mortgages," said Grace Frank, a Realtor with Real Estate Partners. "We're seeing more young people move to Chattanooga from places like California where the cost of housing is just so much higher."
Surveys by Clever Real Estate found that millennials are twice as likely to be stressed about home ownership than Baby Boomers and they are much more likely to experience buyer's remorse than older generations. Nearly 50% of millennial respondents felt a least some buyer's remorse following their purchase of a home.
O'Shaughnessy said the extra stress comes from having to shoulder bigger monthly mortgage payments. Two thirds of millennials put less than 20% down, leading to higher mortgage payments. In fact, the biggest reason for millennials' buyer's remorse was that their mortgage payments were too high.
In Seattle where median home prices sit around $537,800, for instance, a 20% down payment requires $107,560, which O'Shaughnessy said is "out of the realm of possibility for the average debt-strapped millennial."
Contact Dave Flessner at email@example.com or at 757-6340.