Blame it on the Millennials!!
Millennials are changing the real estate market. The focus is trendier urban markets, with overall
housing construction shifting to “Hip” apartments and lofts. The rush of the younger generation to U.S.
cities over the past few years is transforming urban areas: Downtown LA is one example and Pasadena is
another. Millennials relish a somewhat “edginess” of a neighborhood in transition and are not afraid of
areas that are in the process of “gentrification”.
As one of the country’s largest urban areas, the greater LA area has seen housing construction stronger
than normal in the urban cores but weaker in the suburbs, where new housing can be built abundantly
and more cheaply. “The expensive cities tend to be shifting toward a paradigm that says having a better
location is better than having a fresher, greener, newer place,” said Issi Romem, chief economist at
BuildZoom.
“Better location” has a different meaning than it did 10 years ago: the new buzz words are walkability,
close to public transportation, bike lanes, parks, close to restaurants and shops. The real estate market
has quickly reacted to these changes and the costs of land, warehouses and areas within the commercial
cores, often neglected areas, have skyrocketed in a very short period of time. This in turn has pushed
developers to focus on higher-end housing geared toward high earners. Although there are many young
tech people with great salaries, there’s also a trend towards higher debt. There’s not much inventory for
younger people just starting out. Many are forced to stay living with parents or getting room-mates.
Enter the “ticking clock”: Millennials are getting older and they end up getting married or coupling with
partners. They start wanting some of the “normal things of life” like kids, a dog and a yard. Since many
of the urban areas have an inordinate amount of rental units, the demand for first-time homes has
started to bounce back. Does this mean that there may be a return to some of those ex-urban areas?
Does it mean that there will be less competition for the urban areas as the large Millennial population
starts to age?
Instead what we’ve seen is Millennials flocking to the “forgotten areas” close to urban centers that have stagnated for years.
Areas like Eagle Rock, Echo Park, Highland Park, Glassell Park have all had skyrocketed. The trend toward
small lot subdivisions allows density in a way that “feels like a home”. Will this trend herald in the return
of clustered single family homes in urban areas?
