Millennials as a whole may have put off home buying longer than those who came before them, but market trends show that the largest generation in history is beginning to warm to the idea of home ownership and that the East Valley is a prime destination for young buyers.
The distribution of millennial buyers is not equal across the East Valley, though. While Chandler and Gilbert are attracting millennials, Ahwatukee is not a primary market to those buyers because of a higher barrier to entry.
That is not to say the community has a tepid housing market, though.
“We are seeing a hot market in Ahwatukee (for homes up to about $700,000),” said Realty Executives’ Patrick Lewis, who is also first vice president of the Arizona Association of Realtors.
Those higher home prices have predominantly appealed to second-time and move-up buyers, and the lack of affordable homes in the $150,000 to $200,000 range makes Ahwatukee unappealing to millennial and first-time buyers, analysts say.
Buyers in Ahwatukee also are facing increased competition as the supply of homes on the market in the 85044 zip code is down from last year. Despite that decrease, sales numbers are actually up – proving buyers in the market are highly motivated, Lewis said.
The one market that is seeing a glut of inventory in Ahwatukee is luxury homes.
While the market has improved in the past few months, there is still a lot of inventory sitting because there are fewer buyers interested in homes above $750,000, Lewis said.
Unlike Ahwatukee, Chandler and Gilbert are uniquely poised to take advantage of the entrance of millennials into the home buying market, said Realtor Mindy Jones Nevarez, one of the agents behind ChandlervsGilbert.com.
That website provides comparison information for people considering a move to either of the two communities.
Older millennials – people ages 27 to 36 – made up 28 percent of home buyers in the country in 2016. That ties them with Gen Xers for the largest representative share of total home buyers last year, according to the National Association of Realtors Home Buyer and Seller Generational Trends Report 2017.
Add younger millennials, who made up 6 percent of buyers, and the demographic group as a whole represented the largest demographic of home buyers in 2016, according to the report.
The ChandlervsGilbert website is a collaborative project by Nevarez’s Amy Jones Real Estate Group and Merrill Jencks’ Big Helper Real Estate Group and is geared toward younger home buyers in particular as they are more apt to look online for information.
East Valley millennials, who have gravitated toward rentals in recent years and helped spur an apartment boom throughout the Valley, are now interested in home buying due in large part to rising rents, Jencks and Nevarez said.
“Cost for rent has gone up significantly, especially in (the) Southeast Valley,” Nevarez said, noting millennials have “really gravitated toward renting” in the last five years.
“We are able to show them that they can spend less on a mortgage payment” than they currently spend on rent, she said.
Median apartment rents in Gilbert have gone up 3.4 percent over the past year while those in Chandler have risen 5 percent in the same span, according to Apartment List, an online rental marketplace.
Nevarez and Jencks also said rising interest rates are spurring the members of the generation to buy homes sooner rather than later, when their money will not go as far.
Predictably, age is also playing a role.
“A lot of millennials are at the age for starting families and suddenly living close to nightlife is less important,” Jencks said. “They want to live in safe family neighborhoods and don’t want to be super-far away from work, which makes Chandler and Gilbert attractive.”
Both cities have done a good job of developing a variety of different housing, employment and entertainment opportunities while maintaining things like good schools and low crime rates that are hard to find in larger cities, Nevarez said.
The concentration of high-paying jobs in Chandler and Gilbert is another attraction for young home buyers.
Factors that historically have kept millennials from buying homes include concerns about income and debt.
In 2015, the average income of people ages 25-29 was $27,100, well below the average of $30,300 in 2000, according to Harvard University’s State of the Nation’s Housing Report 2017.
This has led millennials to put off home buying in favor of living with their parents longer or opting for renting.
However, as millennials age, they should form households at rates similar to previous generations, according to the report.
In Chandler, the average age of all residents is 34.9 years old and the median overall income of the population is $75,633, according to the city.
Those incomes also work as an incentive to buy.
“In addition to soaring rental prices, there are the tax benefits,” Jencks said, noting that millennials “are getting well-paying jobs and paying more in taxes than ever before.”
The types of homes millennials are buying run the gamut.
While many younger buyers are interested in older homes with character, there is a limited supply of them in Chandler and Gilbert, Jencks said.
Both Jencks and Nevarez have seen younger buyers gravitate toward new builds and updated homes over fixer uppers.
“The whole idea of sweat equity is not of interest to them,” said Jencks. “They would prefer to pay top dollar for a home that is move-in ready.”
They are also willing to purchase smaller homes with higher end amenities over larger dated properties.
– Reach Wayne Schutsky at 480-898-6533 or firstname.lastname@example.org.