Home » 2014 Categories » 2014 Durham Paper » The Millennial Generation and Durham’s Housing Market

The Millennial Generation and Durham’s Housing Market

By Gabrielle M. Ware  The Millennial Generation and Durham’s Housing Market

Introduction

In the most recent decade, Durham has experienced a large influx of members of Generation Y, otherwise known as the Millennials. Millennials, defined throughout this paper as those born between 1980 and 1998 are currently between ages 16 and 34 and described as educated, diverse, creative, connected and open to change. Forecasted to be the most educated generation in the United States’ history, greater than one-third, or 37%, are unemployed or out of the workforce as a result of the nation’s 2008 Financial Crisis1. In the search for financial stability, members of this generation are drawn to Durham and its surrounding area because of the high caliber universities located there, as well as the promising jobs in healthcare, pharmaceuticals, and other professions found in Research Triangle Park. There is definite incentive for Durham officials to continue to attract and retain members of Generation Y to sustain the county’s high growth rate. The rise of an educated, and hopefully successful, generation will not only bring more young professionals into Durham, but will also benefit businesses and Durham’s overall economy. Typically, Millennials want to live in high-density neighborhoods, accessible to centers of business and employment either by walking or public transportation, and desire affordable urban rental spaces as they  try to achieve financial stability. As Durham’s housing market becomes dominated by Millennials, demand for the aforementioned types of housing will certainly increase and it will be interesting to examine how Durham officials will respond to this changing demand.

The goal of this paper is to explore which communities and neighborhoods Millennials are most attracted to and what factors determine their housing choice. To achieve this goal I will compare neighborhoods with the highest and lowest proportions of Millennials in Durham County and will go over the study of Millennials in Philadelphia conducted by the PEW Charitable Trusts. Because patterns have shown that members of this generation are more concerned with the quality of their surroundings than of their housing itself, I will focus primarily on which neighborhood and county qualities will play the largest role in these buyers’ decisions.

Millennials and the Housing Market

Over the past five years, as the majority of members of Generation Y have reached their twenties and thirties, there has been increasing concern about the housing market. In the decades of their lives in which previous generations have driven growth in homeownership, many Millennials are putting off owning their own home due to massive amounts of student loans they must pay back and uncertainty in the job market. Additionally, members of this generation have been known to switch jobs more often than their parents, spending only about two years in each position before moving on to a new one. This creates another deterrent to homeownership, as Millennials prefer not to be tied down in any sense, and many members of Generation Y are even more hesitant after witnessing the suffering of their slightly older friends, many of whom had just bought their first home when the housing bubble burst. Furthermore, Millennials are marrying much later than previous generations with 75% still single between the ages of 18 and 28, compared to 67% of Generation X and only 52% of their baby boomer parents at the same age. This could also be working to slow home purchases, as marriage is a milestone that often coincides with homeownership. However, this must be taken in stride as members of Generation Y are also much more open to couples living together before marriage, and much more social in general, than previous generations were. This combination of both financial and preferential reasons against owning a home has led to largest drop in homeownership of any age group in the United States for 24 to 33 years old between 2005 and 2011. Despite this decline, approximately 93% of Millennial renters still plan to own their own home at some point in the future, indicating that this decline is driven by lack of funds and may only be temporary. Still, many experts point out that this reluctance to purchase now may leave members of Generation Y stuck in a far less favorable real estate market down the road and unable to reverse the trend. Although there are many benefits to purchasing a home now, with Trulia estimating that it is 35% cheaper to own a home than rent in America’s largest cities due to slightly undervalued homes and interest rates that are still historically low, many Millennials have insufficient funds and are too afraid of the commitment to one place to make a down payment.

In addition to whether or not they will rent or buy, another important factor to consider when assessing the housing needs of this generation is whether or not needs are likely to change in the long term and by how much. While it is true that Millennials are currently seeking out small and affordable housing in high-density city centers, with only 14% living in rural areas, these needs may change in the next five to ten years. A look at the population between ages 20 to 34 in Philadelphia gives some insight into how this generation’s needs may be rapidly changing. During the period between 2006 and 2012, Philadelphia experienced a larger increase, totaling 6.1%, in members of Generation Y as a percentage of its total population than any other US city; however, this growth may only be short lived as slightly over half of the Millennials living in Philadelphia plan to relocate in the next five to ten years and would definitely not recommend the city as a good place to raise children. The there main considerations survey participants cited for planning to leave the city were jobs/career, school quality/child upbringing, and the crime/safety/drugs. A full list and more detailed comparison between Millennials and older generations can be found in Table 1 (Appendix at end). From the case of Philadelphia, it is implied that successful policy to attract and retain Millennials will need to be adapted as the generation’s needs change and that Durham may benefit from incorporating both long-term and short-term strategies.

Millennials in Durham

As shown in Figure 1, Millennials have located throughout Durham in accordance with what is predicted by patterns and preferences of the generation. The map shows Durham County, divided into 60 smaller census tracts as defined by the US Census Bureau for more uniform and complete data. The five tracts with the highest proportions of 16 to 34 year olds are marked with green diamonds, while the five tracts with the lowest proportions of 16 to 34 years olds are marked with red circles. Even from a quick glance, it is apparent that the five tracts with the highest proportions of Millennials are clustered near the city-center while the five tracts with the lowest proportions of Millennials are scattered around the Durham County’s edges. Table 2, created by data obtained from the US Census Bureau American Community Survey five year estimates from 2008 to 2012, show some of the most relevant characteristics of each of these ten tracts and the differences between the two groups can be used to demonstrate which factors have led Millennials to distribute themselves as they have throughout Durham.

When examining the five census tracts with the highest proportions of Generation Y members living in them, it is not surprising that two, 15.03 and 15.01, contain Duke’s East and West Campuses, respectively, two, 15.02 and 4.02, correspond with areas touching Duke’s Campuses and the final tract, 13.03, contains North Carolina Central University’s campus. When examining the eight included characteristics of each tract, including population density, number of occupied rental units, median gross rent, median household income, proportion of residents with at least some college education, median commuting time to work, and the proportions of residents that are black and Hispanic, any extreme outliers can be explained by the presence of specific institutions in or adjacent to the tracts. For example, 100 percent of the population in tract 15.03 has at least some college education and the median household income, $67,454, is uncharacteristically higher than the surrounding area as a result of the presence of Duke’s East Campus, filling almost the entire tract.  This fact also explains the lack of data to estimate the median gross rent. When examining the tracts with lowest proportions of Generation Y members, it is also not surprising that four out of five tracts feature either a golf or country club or luxury development, while the tract with the absolute lowest proportion of Millennials, 9801, is fairly non-residential including two major highways and Research Triangle Park. Again, the aforementioned features of each tract can explain away any outliers, such as the extremely low population density and proportion of Millennials in tract 9801, as young adults commute to work in RTP, but do not live there.

The differences between the groups with high and low proportions of Millennials were also not surprising. Because of their documented affinity for high-density city centers, the clustering seen in Figure 1 and higher population densities of the tracts with high proportions of Millennials were to be expected. All of these areas are within walking distance from some sort of city center and are accessible by public transportation. This desire to be close to some sort of community is also reflected in the relatively shorter commuting times to work places in tracts with higher proportions of Millennials. Additionally, it is consistent with trends in other cities that tracts with high proportions of Generation Y members have many units available for rent at affordable prices, as many Millennials are burdened with student loans and trying to be debt free and secure some sort of emergency fund before purchasing a home10. It can also be seen that tracts with higher proportions of Millennials are more diverse, another defining characteristic of this generation.

What Does this Mean for Durham?

Because of the great universities located in and surrounding Durham County, as well as the promising professional opportunities in Research Triangle Park, Durham has already begun to attract members of Generation Y at high rates. Still, Durham has not experienced an influx of the same magnitude as cities like Philadelphia, Boston, Nashville, and Baltimore11. Because of this, policy for Durham should take a two-sided approach. First, in the short-run, Durham authorities should learn from and attempt to mimic some of the conditions in the aforementioned cities and parts of Durham that have already attracted high numbers of Millennials. Understandably, it is impossible for Durham to match the size, density, and connectedness of a city like Boston in the short run, but it can take some steps in the right direction. As seen in Figure 1, the most important factor for members of Generation Y when deciding whether or not to relocate is for job or career opportunities. It is clear that in order to attract Millennials, the city must make it worth it for them professionally. Durham’s government can help achieve this by offering incentives for companies that provide professional opportunities located in Durham or within reach of the city’s public transportation.

Once attracting Millennials to the opportunities Durham has to offer, the city must accommodate the living needs of Generation Y. Durham authorities must make an effort either to expand upon community centers already in existence with more affordable housing or to plan additional centers that will be walkable to some degree, and have access to centers of employment. As an extremely connected and collaborative generation, members will also be attracted to high concentrations of young adults, as well as youthful, liberal, and creative ambiances. The addition of a 26-foot sky-scraper at the corner of Main and Parrish Streets, a redevelopment project led by Austin Lawrence Partners set to break ground in the Fall, is a step in the right direction for Durham. The high-rise, which will consist of a mix of retail, office, and residential space and is already in surrounded by award-winning restaurants, theaters, and sports centers, will be certain to attract young and professional adults and solidify the city’s downtown area, creating a high energy and urban environment.

In addition to meeting the needs of Millennials today, Durham officials should learn from the case of Philadelphia and try to anticipate how the needs of Generation Y members will change in the next five to ten years. As shown in Table 1, young adults between the ages of 20 and 34 are concerned about living in a family oriented city that has good school districts and is safe in addition to having good career opportunities in the future. It is also true, that members of this age group still plan to invest in a home at some point down the road. Durham authorities should plan ahead for this need, so when the time comes to make the more permanent decision of buying a home and settling down with a family, Millennials do not choose to locate elsewhere. To do this, officials must work to ensure a safer and cleaner city, as well as school quality that rivals not only neighboring districts, but is competitive on a national level. The low quality of Durham Public schools in relation to Orange and Chatham County school districts will be one of Durham’s biggest challenges in retaining Millennials in the next decade. Possible solutions include raising teacher salaries as a way to attract better teachers, which may enhance school quality, or increasing per pupil spending; however, these solutions will also make Durham a less affordable place to live. Additionally, there is reasonable doubt to believe that increasing per pupil spending will translate into increased school quality in the homebuyer’s eyes12. Furthermore, Durham officials must work to create clean and safe neighborhoods consisting of affordable homes so that educated professionals will make the more permanent decision to stay in Durham. Over time, this may translate into better school quality for Durham, as the children of educated parents will be far less expensive to teach.

Overall, Durham’s goals to create a better living environment for Millennials are complementary to one another and cannot be achieved alone. Professional job opportunities and urban centers must exist to attract members of Generation Y initially, and then safe and affordable housing communities must follow to retain them. Better school quality will hopefully ensue as Durham begins to consist of a more educated demographic. Policy throughout the next decade will be critical in whether or not Durham will continue to sustain high growth levels.

Appendix

Table 1: Main Reasons for Expecting to Leave Philadelphia in the Next 5-10 Years for Millennials in Contrast to Older Adults

Screen Shot 2014-04-08 at 11.23.20 PM

 

Figure 1: 5 Census Tracts Least and Most Populated by Millennials

Screen Shot 2014-04-08 at 11.24.13 PM

 

Table 2: The 5 Census Tracts in Durham with the Most and Least Millennials and their Characteristics

Screen Shot 2014-04-08 at 11.25.12 PM

 

References

1. Bissonnette, Zac. “Homeownership: The Elusive American Dream for Millennials.”CNBC.com. N.p., 28 Nov. 2013. Web. 23 Mar. 2014.

<http://www.cnbc.com/id/101229496>.

2. Bracken, David. “Report: Triangle Home Prices Kept Rising in January.”&newsobserver.com (n.d.): n. pag. Web. 20 Mar. 2014.

<http://www.newsobserver.com/2014/03/04/3672461/triangle-home-prices-kept-rising.html>.

3. Clapp, John M., Anupam Nanda, and Stephen L. Ross. “Which school attributes matter? The influence of school district performance and demographic composition on property values.” Journal of Urban Economics63.2 (2008): 451-466.

http://digitalcommons.uconn.edu/cgi/viewcontent.cgi?article=1094&context=econ_wpap ers

4. DeBruyn, Jason. “Pew: Millennials with a College Degree Earn 38% More than Those without.” Triangle Business Journal. N.p., 12 Feb. 2014. Web. 20 Mar. 2014.

<http://www.bizjournals.com/triangle/news/2014/02/11/millennials-with-a-college-degree-earn.html>.

5. Durham, North Carolina Government. Durham City-County Planning Department.

Forecasting Land Use and Trends. By Daniel Band and Holli Safi. N.p., Apr. 2013. Web. Mar.2014.

<http://durhamnc.gov/ich/cb/ccpd/Documents/Comprehensive%20Plan/Land_Use_Report/Forecasting_Trends_and_Issues_032013.pdf>.

6. “Millennials in Philadelphia: A Promising but Fragile Boom.” The PEW Charitable Trust(2014): n. pag. Web. 20 Mar. 2014.

http://www .pewtrusts.org/our_work_report_detail_full.aspx?id=85899534472>.

7. Millennials: Confident. Connected. Open to Change. Rep. Pew Research Centers Social Demographic Trends Project RSS, 24 Feb. 2010. Web. 21 Mar. 2014.

<http://www .pewsocialtrends.org/2010/02/24/millennials-confident-connected-open-to-change/>.

8. Roth, Bryan. “The Future of Duke’s Workforce.” DukeToday (2014): n. pag. Web. 20 Mar. 2014.

<http://today.duke.edu/2014/02/millennialworkforce>.


2 Comments

  1. Mischa-von-Derek Aikman
    Comments for Gabrielle Ware’s “The Millennial Generation and Durham’s Housing Market”
    April 13, 2014

    Gabrielle, I found your paper to be very pertinent to what seems to be very common topic of discussion recently. The advent of members of Generation Y in Durham is something that I am positive will mold the future of the county. Most of my comments are structural, and are not necessarily directed towards issues with the content.
    I believe you do an excellent job in introducing your topic, and very explicitly stating what your intended goal of your paper is. You then go on to mention the fact that you will use “the study of Millennials in Philadelphia conducted by the PEW Charitable Trusts” as a part of your study. The use of this previously executed study makes more sense when you bring it up later in the paper. However, I believe that perhaps stating a brief reason as to why it is suitable for the scope of your study when you first mention your plan to use it might steer the reader in the right direction a bit earlier.
    Another comment regarding the structure of your paper is your style of referring to visuals located in your appendix. I think that your piece in particular, which only utilizes a total of three visual aids, can afford to have one or two of them located in the body of the text itself. I only make this suggestion as it makes it easier for the reader to refer to the visual whilst reading along with the analysis. That being said, I think you do an excellent job, especially within the first paragraph of your “Millennials in Durham” portion, of very clearly walking the reader through what exactly the figures represent.
    Furthermore, you make mention of the “10 tracts” which can be used to explain the presence of any outliers multiple times before we actually find out what they are. I think perhaps making mention of an example of what these are can be helpful to get the reader in the right mindset as to what types of characteristics these 10 tracts refer to.
    Lastly, I believe the “What Does this Mean for Durham” section is extremely thorough, and exceptionally well written. I really appreciate your careful analysis of the characteristics between the different groups. I also thought it was great that you presented tangible suggestions as to what actions and measures the government, and school systems can take in order to work towards the right direction. My only comment on this part is that I think it would be a lot more effective, and easier to follow if you sectioned this part based on topic. For example, if you were to clearly state the issues with the schooling quality, and then proceed to flesh out the facets of this aspect. After completing that, move on to grappling with the delayed desire of permanent housing, and then proceed to flesh out this subtopic as well. I do realize, however, that this is more of a stylistic suggestion, and I do believe that the way you have it presently works just as fine as well!

  2. I think this topic is very interesting and also relevant because as we graduate college we will be in the shoes of the individuals you write about. In terms of organization, I find your paper very fluid and well-written. I found myself thinking about people I know who face the predicaments you write about, which made reading the paper enjoyable and thought-provoking. I enjoyed the discussion about how societal factors play a role in an individual’s decision to own a house. For example, the fact that today’s generation is getting married later affects the housing market, yet the fact that these individuals are willing to live with a significant other before marriage also affects the housing market. These competing factors play a major role in the housing market and thus in the economy as a whole. I think that your connection of this topic to Durham was very interesting and logical. Durham, although a smaller city, has potential to reach success that parallels that of cities like Philadelphia and Nashville that you mentioned. I also think it is very important to think about the transition of millenials from individuals who care predominately about job opportunities to individuals who may care predominately about raising a family and the education system. Certainly it would be logical to increase pay for teachers, raising the quality of education in Durham and attracting families, but this is easier said than done because education budgets are consistently shrinking. However, if Durham were to prioritize its money, increasing teacher salaries, although costing the city money in the short term, may be beneficial in the long term, from a city financial perspective. I am glad that you mentioned the sky scraper addition to downtown that we learned about in class, because I think this will not only transform the city physically, but it will offer incentives for millenials to migrate to Durham. It will be interesting to see what happens to Durham in the future. I think if you could find comparable cities in terms of size and industries, you would be able to comment on trends that are happening around the country and be able to confidently predict where Durham will be in the future.

Leave a comment

Your email address will not be published. Required fields are marked *