High-rise apartment projects are blooming in a fractured Atlanta housing market, and experts say much of the growth is due to increased demand from millennials who are putting off home purchases.
Driving the shift from owners to renters are those would-be homebuyers born between the early 80s and late 90s. Many entered the workforce during a historically bad economy that limited job prospects and career growth, forcing them to postpone plans to marry, have children and form households.
Almost three-quarters of millennials list home ownership as an important long-term goal, according to a survey by the nonprofit Demand Institute in September.
One of them is recent University of Georgia graduate Nick Cotie, 23.
“My dad lived in apartments forever,” said Cotie, who is interning at a Christian outreach service in Athens. “It was almost a sign that my family was not together.”
But the Cumming native said he probably won’t buy for several more years. He thinks he will need to finish graduate school, get married and find a steady job before he can consider adding a mortgage.
That reflects a concern of millennials nationally, says David Stockert, president of Post Properties, which operates multi-family housing units in areas such as Atlanta, Houston and Washington.
“Buying a house is a big commitment that locks you into a location. If you’re worried you might want to move — or might have to to move to change jobs — having the flexibility of being a renter is very attractive,” Stockert said. “That millennial generation is at an age that is a prime renter age.”
The collapse of the housing bubble still serves as a caution flag for those who consider ownership an investment. And as rentals rise, experts wonder if these temporary digs will become the national norm while ownership rates decrease.
Atlanta has a particularly low home ownership rate at 60 percent, 55th among the 75 biggest metro areas, according to the Census Bureau. The decrease coincides with a drop in the national average to 64.4 percent, the lowest since 1994.
“Atlanta’s back to being a barometer for the nation because we’re back to being the third biggest housing market,” said John Hunt, president of Atlanta analysis firm Smart Numbers. “If it’s happening here, it’s happening nationally.”
A rapid rebound in home prices and tight inventory the past year or so has deterred some young buyers. The cost of homes in metro Atlanta’s five core counties rose from $140,000 in 1998 to about $240,000 today, according to data compiled by Smart Numbers’ Hunt.
As many millennials are priced out of the market, first-time homebuyers make up a smaller portion of buyers, dropping from almost 20 percent in 2013 to about 15 percent in 2014. They aren’t likely to stay out of the market for good: As they age, Hunt predicts, even millennials will settle down into homes that they own.
“You have people in different camps, people who really believe this is a seismic shift over time. Then you have people who think that we’re probably going to see the rentals start declining,” Hunt said. “I don’t know about massive shifts, but a tick or two back to home ownership would be my guess.”
Post Properties’ Stockert said population increases will encourage apartment growth. Millennials are more likely to settle in urban areas and are also the largest generation. Young people tend to rent before they buy, and many have lived with parents or roommates before venturing into the home marketplace.
“As Atlanta goes from 5.8 million people to 8 million in the next 20 years, you’re going to see more urban dwellings,” Stockert said. “And the only type of dwelling you can produce in any type of quantity in town are multi-family apartments and condos.”
After seeing an increase in demand for multi-family housing to start 2012, Sam Massell started a monthly list of new rental developments in Buckhead. That list quickly grew and, after only three years, includes 30 projects expected to bring more than 9,400 housing units to the area.
Two apartment towers housing more than 702 units were announced for Buckhead in February, to be developed by Crocker Partners at Piedmont and Lenox Roads. Midtown has 350-unit projects planned for Peachtree Place and West Peachtree street. Atlanta’s BeltLine has won developments from Perennial Properties and AMLI.
“Even if only half of them are built, that’s a big impact on development on the skyline,” said Massell, president of the Buckhead Coalition and a former Atlanta mayor.
Many millennials prefer to live in walkable urban centers near public transportation and shopping – areas where rentals often abound but property rates skyrocket.
Buying a house at a manageable price might require a trip outside the perimeter. Mortgage lending standards have tightened since the recession. Saving for that first down payment is still a significant hurdle.
“Disposable incomes are dropping,” said Steve Palm, president of Smart Numbers. “It’s just tougher to come up with the down payment.”
More millennials go to college than in past generations, said Cheryl Russell, a demographer and editorial director for the New Strategist Press. That pushes back some life decisions while also saddling them with higher student debts than their parents and grandparents.
“More have been in school and stayed longer,” Russell said. “It’s a temporary phenomenon, although they may not ever have the home ownership rates that the older generation has.”
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