Wisconsin REALTORS® Association: Generation Y Future in Single-family Homes

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  1. Insights Home
  2. What Millennials Mean for WI Housing Market
  3. Pent-up Demand
  4. Millennials Want to Own a Home

Two out of three Millennials aspire to own a home  

Single Family House

Pent-up demand

In 2015, the Millennial generation became the largest numerical segment of America's workforce. In 2016, they will become the largest percentage of the workforce. Although Millennials have been slow to enter the housing market, the National Association of REALTORS® indicates that 91 percent of Millennials report that they want to get married and own a home. As they do so — and many have already bought homes — they will become the largest generation of homebuyers in American history. In the first edition of the Insights report, professor Steve Malpezzi of the James A. Graaskamp Center for Real Estate at the Wisconsin School of Business provides information and insights about your future customers.

Gen Y sees Future in single-family homes  

In Wisconsin, Millennials will find good prices and affordable financing. Mortgage rates have been rising recently but are still low since the Greenspan put during the 2001 recession, and prices have strengthened lately but are still below 2006 peaks. Overall, both national and Wisconsin data from experts confirm that housing affordability is solid for those who can qualify for a mortgage.
 
Wisconsin is in better shape than many others in this area. Research on house prices currently under way at the Graaskamp Center confirms that Wisconsin markets have been much less volatile than other markets. Wisconsin experienced an early 2000s boom and a post-2006 bust, but these were modest in all major metropolitan markets across the state compared to much of the rest of the country. Recent prices in Wisconsin have shown moderate growth in line with fundamentals, and Wisconsin markets are affordable and stable. 
 
  Generation Future Hires

Source: Urban Land Institute   

State median single-family house prices in 2014

In Wisconsin, Millennials will find good prices and affordable financing. Mortgage rates have been rising recently but are still low since the Greenspan put during the 2001 recession, and prices have strengthened lately but are still below 2006 peaks. Overall, both national and Wisconsin data from experts confirm that housing affordability is solid for those who can qualify for a mortgage. 
 
Wisconsin is in better shape than many others in this area. Research on house prices currently under way at the Graaskamp Center confirms that Wisconsin markets have been much less volatile than other markets. Wisconsin experienced an early 2000s boom and a post-2006 bust, but these were modest in all major metropolitan markets across the state compared to much of the rest of the country.
 
As the chart below shows, while Wisconsin and every state experienced problems, Wisconsin missed the boom in the early 2000s and the bust that followed. Wisconsin is the thick red line; the U.S. median is represented by black dots. State median prices were as high as $643,000 in Hawaii, $578,000 in D.C., $486,000 in California and $367,000 in Massachusetts. The national median is $213,000, and the median for Wisconsin is a relatively affordable $164,000. Of course these state medians mask higher prices in bigger cities and selected neighborhoods in a range of locations, but overall, recent prices in Wisconsin have shown moderate growth in line with fundamentals. Nationwide, some markets in coastal areas have begun to show a little froth but Wisconsin markets are affordable and fairly stable. 
State Median Single Family Homes

Source: Federal Housing Finance Agency, DataQuick, FHA, Bureau of Economic Analysis. 

Median real monthly rents in 2000 and subsequent real rent increases, selected metropolitan areas

The rental market will continue to thrive for Millennials and others. While the majority — 65 percent — of U.S. households are still homeowners, rental housing, which is always important,  has been especially critical since the 2006 housing bust. In 2006, there were about 76 million owner-occupied households; since that time, the number has declined slightly to about 75 million. But over the same time frame, the number of rental households increased from about 35 million to 41 million today. In Wisconsin as well as the U.S., multifamily starts are back above trend, yet single-family starts are still well below trend. 
 
Most multifamily units are rental properties, but about 13 percent are condos and co-ops. Few single-family units are purpose-built for rental, but about 15 percent of single family units are rented. Looked at another way, about 60 percent of rental housing is multifamily, and about 35 percent of rental housing is single family; another 5 percent of renters live in mobile homes. 
 
Rents in Wisconsin are less burdensome compared to many other states. Richard Green and Pamela Lee use Census and American Community Survey data to analyze inflation-adjusted rents and incomes in 2000 and 2013; some of their data is presented below. Each dot represents a metro area; Wisconsin metro areas are labeled with a short version of their names. 
 
Compared to other markets, Wisconsin’s metro areas have moderate rent levels and have experienced modest increases in recent years. As the chart below shows, real rents have been rising during the past decade in many markets, especially in coastal markets. The national average rent in 2013 was $876; all the Wisconsin metro areas were below this average. The average real growth rate from 2000 to 2010 was 0.8 percent; all Wisconsin metro areas were below this average. On balance, rental housing, and for that matter owner-occupied housing, remains affordable by national standards in Wisconsin.
Median Monthly Rent

Source: Data from Green and Lee analysis of Census and American Community Survey data for 193 metropolitan survey 

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