Why Are Millennials Buying So Many Houses In Des Moines?
While across the country first-time home buying is still down since the recession, it appears millennials are starting to move out of apartments or their parents basements. One place millennials are currently buying a majority of the houses is Des Moines.
Dani Ausen is a 33-year-old graphic designer and jewelry maker in Des Moines. She and her husband Ken bought their home about three years ago. The first-time buyers paid less than $160,000 for a ranch-style house not far from downtown. The three-bedroom wasn't a fixer-upper, or in a transitional neighborhood. Ausen even liked the interior's bold paint colors or orange, red and dark turquoise.
"That actually kind of sold the house to me a little bit," she says. "Seeing it not painted all white or beige was very helpful."
Locally-produced artwork and musical instruments fill the walls. There are also a lot of skulls.
"People always ask me if it's a morbid thing, and I just kind of like how they look. So I kind of tend to buy a lot of home decor in the month of October and then just leave it up all year."
Ausen says she feels very lucky to own a house. And in central Iowa she had lots of company these days. According to Realtor.com, 59 percent of the borrowers in the Des Moines Metropolitan Statistical Area who used a mortgage to buy a home in the first half of 2015 were between the ages of 25 and 34. That far outpaces the national average of 37 percent.
"[A] key enabler, is that Des Moines is affordable for both buying and renting," says Realtor.com's chief economist Jonathan Smoke. "If you're in a scenario when you're spending 20, 40 percent of your income on rent, you're not going to be in a good position to save for the down payment."
Additional factors Smoke cites that make Des Moines a millennial home-buying hotbed is that it attracts an educated workforce due to strong insurance and financial sectors, proximity to two large research universities, and the fact central Iowa historically has had a high rate of homeownership, meaning there are fewer Gen X-ers or baby boomers looking to buy.
Elora Raymond, and her collaborator Jessica Dill, research housing trends at the Federal Reserve of Atlanta. They found while home buying is still down since the recession, the median age of first-time home buyers actually skews slightly younger, and they say that's because younger first-time buyers have better credit.
"What I think is happening is....as opposed to people who tended to buy in their late 20s, the people in their older 30s on average had lower credit scores all along. So when credit tightness happened, those people dropped out of the homeownership market all together. And so what's left is the people who had very had credit scores...so they are still buying just as much as they ever did," says Raymond. "That suggests to me that it's not just a millennial attitude that has changed. It has more to do with the credit scores."
A report from the the Pew Research Center supports Raymond and Dill's findings on millennial debt. Pew finds, "that analysis of the Survey of Consumer Finances indicates that the median debt of households headed by those younger than 35 fell from 2001 ($17,938) to 2010 ($15,473). The median debt of older households rose." This is in spite of record levels of student debt.
One possible contributing reason as to why millennials, especially younger millennials, have less debt is because survey data suggests younger adults aren't big drivers. And this may be behind why millennials are purchasing homes in locations where cars are less necessary.
"The younger you are, the more likely you are to buy within one mile of the city center. And we confirmed that over all millennials are buying about a mile closer in, on average, than other first-time home buyers, and also closer than existing homeowners younger and older," says Raymond. "More millennials buy in the suburbs than in the cities, if you just look at raw numbers. But the rates have been changing, so people have been moving closer and closer in."
Suburban-Des Moines-based Hubbell Realty says it's having its best year ever, and Vice President Rachel Flint attributes this partly to millennials who want to live downtown.
"They want to walk places. They want to go places and not worry about driving their car," she says.
All 26 townhouses in Hubbell's still-underway development near Des Moines's sculpture garden has completely sold, and Flint says about half have been bought by young professionals. These units sell for roughly $60,000 above the average listing price in Des Moines. So where were all these millennials living before buying swanky townhouses in downtown Des Moines?
"They were living in apartments with their friends or they were living in their parents' basement," says Flint. "In fact we have some millennial realtors who just moved out of their parents' basement and purchased a home. They were taking their time until the moment was right for them."
So for cities that would like to attract millennial home buyers at the same rate as Des Moines, it appears good jobs and affordable housing must be in the mix. But to really coax frugal 20 and 30-somethings into homeownership, it's best to develop housing near a city's center.