How Millennials Are Shifting the Housing Market

They’re settling in urban centers. In many ZIP codes, they’re already the majority. And they spend their money on rent.

It’s tough being a millennial. Millennials are accused of killing entire industries: casual dining chains that should have been killed off by a prior generation, beer (sez Goldman Sachs), napkins, homeownership, Harley Davidson, banks, diamonds, and brick-and-mortar retailers. OK, things change. But there’s one thing the largest US generation ever is not killing off: urban centers. They’re flocking to them, in some case they’re gentrifying them – for better or worse – and they’re often paying sky-high rents.

For example, in downtown Los Angeles, the two adjacent ZIP codes 90014 and 90013 (which includes Skid Row) are being rapidly gentrified with a high-rise building boom. And the millennial population has soared over a five-year period, by 91% in ZIP code 90014 and by 60% in ZIP code 90013. These two ZIP codes have the fastest-growing population of millennials among any large ZIP codes in the 30 biggest US cities, according to a report and data by Yardi’s RentCafé.

The population data – based on the Census Bureau American Community Survey’s five-year population estimates – shows that ZIP codes in or near downtowns are sought out by millennials. In many of those ZIP codes, millennials are now the majority of the population.

The millennial population in Lower Manhattan ZIP code 10282, which includes Battery Park, jumped by 55% over the five-year span. But with an average rent of $5,657 a month, it’s the most expensive ZIP code in the US, according to RentCafé. Wall Street pays well.

The table below shows the top 20 ZIP Codes in large cities that had the biggest percentage increase in the millennial population. The table also shows average rent by ZIP code where available. None of these ZIP codes are cheap, though some of them could be deemed reasonable, by New York City or San Francisco standards.

For this study, the areas are divided into three categories:

• “Downtown” (DT): an area locally known as “downtown,” “city center,” or “central business district.”
• “Near downtown” (nDT): within 3 miles of downtown.
• “Neighborhood” (NH)

In the table, “M-pop” isn’t a kind of music, the “millennial population” in that ZIP code.

Note that Denver has four ZIP codes in this list; Los Angeles has three on this list; New York, San Francisco, and Philadelphia two each. Also note the average rents by ZIP code, in the right column (where available). Some millennials at least are making nice amounts of money – and they’re spending it too – on rent!

For the purpose of this report, millennials were born between 1977-1996. RentCafé eliminated ZIP codes that overlapped with University Campuses and US Military Bases or that contained penitentiaries and correctional facilities. The names of the neighborhoods and their ZIP codes are from the US Post Office and are approximate.

Another way of looking at where the millennials are clustering together is by ZIP code with the largest proportion of millennials – and these are not the ZIP codes with the biggest percentage increases, as seen above.

Below is a table of the 20 ZIP codes where millennials dominate in number — ranging from 60% to 73% of the total population in that ZIP code. At the top is the “consecrated millennial hub,” as the report calls it: Chicago’s West Loop in ZIP code 60661, where 73% of the residents are millennials. The area, which sports a building boom of apartment buildings, is adjacent to the central business district, “the Loop.”

In second place is 19127 in Philadelphia, where 71% of the residents are millennials. The neighborhood, Manayunk, runs along the Schuylkill River and is known, as RentCafé puts it, “for its flourishing small businesses, wide range of leisure activities and dining choices.”

In third place is 10005 in Lower Manhattan, where millennials make up 71% of the population. This is the Financial District and includes Wall St., the actual street.

You’ll also find Oklahoma City’s central business district on this list, along with the Arts District in Dallas, the Astrodome area in Houston, etc. In other words, there are concentrations of millennials in major cities spread across the country. All except for two are either downtown or near downtown.

And finally, the 20 ZIP codes with the largest millennial population in absolute terms. Some of these ZIP codes are very large, and while there are many millennials on those ZIP codes, the percentage of millennials compared to the total population may not be that large.

At the top is 11211 in Brooklyn, where the average rent of $3,200 a month is an outright steal compared to Battery Park in Lower Manhattan (#3 in the first table, $5,657). Nine out of these 20 ZIP codes are in New York City, but none are in Manhattan.

Chicago has six zip codes on this list; Los Angeles only one. You’ll also find El Paso, TX, on it, and at the bottom, San Francisco’s Inner Mission.

Millennials, because of their very large number, are going to shuffle things around a little, much like the baby boomers did when they arrived in the workforce and the housing market. And the housing market has been greeting them as a large opportunity.

Rents have plunged from their respective peaks in Chicago & Honolulu, have spiraled down in New York, Washington DC, & others, but are surging in many markets. Read… Update on Rental Bubbles & Crashes in US Cities 
 

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