Housing's Millennial Mismatch

The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of housing price and rent trends nationally and locally. They adjust for the changing mix of listed homes and show what's really happening to asking prices and rents. Asking prices lead sales prices by approximately two or more months. As a result, the Monitors reveal trends before other price indexes do. With that, here's the scoop on where prices and rents are headed.

Asking Prices Accelerated in November, Rising 7.4 percent Year-over-Year

Nationwide, asking prices on for-sale homes jumped 1.5 percent month-over-month in November, seasonally adjusted -- a surprisingly large increase. Future months will tell whether this was a blip or the beginning of a sustained climb. Year-over-year, asking prices rose 7.4 percent, down from the 10.3 percent year-over-year increase in November 2013. Asking prices rose year-over-year in 98 of the 100 largest U.S. metros -- everywhere but
November 2014 Trulia Price Monitor Summary
% change in asking prices # of 100 largest metros with asking-price increases % change in asking prices, excluding foreclosures
Month-over-month, seasonally adjusted 1.5% N/A 1.6%
Quarter-over-quarter, seasonally adjusted 3.4% 95 3.5%
Year-over-year 7.4% 98 7.3%
Data from previous months are revised each month, so current data reported for previous months might differ from previously reported data.

Prices Rising Fast in Florida, Slowest in Favorite Millennial Markets

Four of the 10 metros where asking prices rose most year-over-year were in Florida. These Sunshine State markets have older populations, and they all have a lower share of millennials than the national average of 21 percent and a higher share of baby boomers than the average of 24 percent. In fact, only one of the 10 markets with the largest price increases in November has a higher share of millennials than the national average -- and only slightly (Las Vegas, at 22 percent).
Where Prices Increased Most in November
# U.S. Metro Y-o-Y % asking price change, Nov 2014 % of population age 20-34 (Millennials) % of population age 50-69 (Boomers)
1 Ventura County, CA 17.2% 20% 24%
2 Palm Bay-Melbourne-Titusville, FL 15.2% 16% 30%
3 North Port-Bradenton-Sarasota, FL 14.7% 14% 30%
4 Oakland, CA 13.4% 21% 24%
5 Cincinnati, OH-KY-IN 13.4% 20% 25%
6 Cape Coral-Fort Myers, FL 13.3% 16% 29%
7 Lakeland-Winter Haven, FL 13.0% 18% 25%
8 Las Vegas, NV 12.9% 22% 23%
9 Detroit, MI 12.9% 20% 25%
10 Atlanta, GA 12.9% 21% 22%
- National average 7.4% 21% 24%
Note: among 100 largest metros. Population shares based on 2013 Census population estimates. To download the list of asking home price changes for the largest metros: Excel or PDF

To see how the age distribution of a metro's population relates to home prices, we identified the 10 markets with the highest shares of each of four distinct generations: millennials (age 20-34); Gen X (age 35-49); boomers (age 50-69); and seniors (age 70 and up). (See note.) In the 10 markets where millennials account for the largest share of the population, including Austin, San Diego and Virginia Beach-Norfolk, the average year-over-year price increase was 6.1 percent -- below the 7.4 percent national increase. Markets with the highest shares of Gen Xers, including Raleigh, San Francisco and San Jose, averaged price increases of 9.4 percent -- highest among the four age groups. Prices in the favorite markets of seniors, most of which are in Florida, rose 8.6 percent -- also above the national increase.

The Millennial Mismatch in Housing Affordability

When young adult renters are asked if they will buy a home someday, a whopping 93 percent say yes. You'd think it would be good news for them that prices are rising more slowly in the markets where they currently live. Not so fast though. Prices might be rising more slowly in millennials' favorite metros. But affordability is nonetheless a big challenge in those markets.

To see this, compare the millennial population share in each metro with the percentage of homes for sale that a typical millennial household can afford (from our most recent Middle Class Affordability report -- see note below on how we define affordability). In metros with higher millennial shares, homeownership tends to be less affordable for this group. For instance, in Austin, Honolulu, New York and San Diego, 20-34 year-olds account for at least 23.5 percent of the population, putting those metros in the top 10 for millennial share. But fewer than 30 percent of homes for sale in those markets are within reach of the typical millennial household. Some markets with a high millennial share are more affordable, including Oklahoma City and Baton Rouge, but they're the exception (see note).

Call it the "millennial mismatch." Millennials can afford markets where they don't live, but they can't afford many of the markets where they do live. Many millennials who hope to buy someday will be priced out of the market where they live now. They'll face a tough choice: Do they keep renting or move to a cheaper market?

Rents Gains Easing Slightly in Most Large Markets

Rents continued to climb. Nationwide, rents rose 6.1 percent year-over-year in November. Still, rent gains have cooled since August in 14 of the 25 largest rental markets, including the Northern California markets of San Francisco, Oakland and Sacramento. In November, Denver had the steepest increases in the country, though the typical two-bedroom unit there still rents for less than half of what it would cost in San Francisco or New York. But
if new apartment construction finally catches up with demand.
Rent Trends in the 25 Largest Rental Markets
# U.S. Metro Y-o-Y % change in rents, Nov 2014 Y-o-Y % change in rents, Aug 2014 Median rent for 2-bedroom, Nov 2014
1 Denver, CO 14.2% 12.7% 1550
2 San Francisco, CA 12.2% 13.4% 3600
3 Oakland, CA 11.9% 14.3% 2450
4 Baltimore, MD 9.3% 8.1% 1550
5 Phoenix, AZ 8.5% 8.1% 1050
6 New York, NY-NJ 8.3% 5.4% 3400
7 Sacramento, CA 8.2% 13.4% 1200
8 Portland, OR-WA 7.8% 3.5% 1300
9 Philadelphia, PA 7.5% 9.2% 1550
10 Tampa-St. Petersburg, FL 7.4% 5.5% 1150
11 Miami, FL 7.3% 9.0% 2300
12 Los Angeles, CA 7.3% 8.2% 2500
13 Seattle, WA 7.3% 8.5% 1750
14 Orange County, CA 7.3% 4.7% 2100
15 St. Louis, MO-IL 7.3% 6.3% 950
16 Las Vegas, NV 6.5% 5.4% 950
17 Chicago, IL 5.9% 7.2% 1700
18 Riverside-San Bernardino, CA 5.8% 6.1% 1550
19 Dallas, TX 5.7% 4.5% 1400
20 Atlanta, GA 5.6% 7.5% 1200
21 Houston, TX 4.2% 4.2% 1400
22 San Diego, CA 4.0% 6.5% 2000
23 Boston, MA 3.8% 4.5% 2300
24 Washington, DC-VA-MD-WV 3.4% 3.6% 2000
25 Minneapolis-St. Paul, MN-WI 1.8% 1.7% 1300
Note: among 100 largest metros. Population shares based on 2013 Census population estimates. To download the list of rent price changes for the largest metros: Excel or PDF
Data on share of metro population in each age group are from the Census's 2013 county population estimates. Because the Census reports county population estimates by age in 5-year buckets (20-24, 25-29, etc.), we defined the four age groups as 20-34 (millennials), 35-49 (Gen X), 50-69 (boomers) and 70+ (seniors).

The correlation for the data shown in the scatterplot between millennial share and homeownership affordability for millennials is -0.28 (-0.48 when weighted by metro number of households), which is statistically significant at the 5 percent level.

We measure affordability as the share of homes for sale on Trulia within reach of the typical millennial household. Our standard is whether the total monthly payment, including mortgage, insurance and property taxes, is less than 31 percent of the metro area's median income for households headed by millennials. The total monthly cost includes the mortgage payment assuming a 4.2 percent 30-year fixed rate mortgage with 20 percent down, property taxes based on average metro property tax rate and insurance. We chose 31 percent of income as the affordability cutoff to be consistent with government guidelines for affordability.

The Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided by RealtyTrac. The Trulia Price Monitor also accounts for regular seasonal fluctuations in asking prices in order to reveal underlying price trends. The Monitors can detect price movements at least three months before the major sales-price indexes. Historical data are revised monthly. Thus, historical data presented in the current release are the best comparison with current data. Our FAQs provide the technical details.