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The Millennial Shift to Gateway Markets

The Millennial Shift to Gateway Markets

The cost of housing has become the number one reason Millennials aren’t saving.

The struggle has been real for Millennials in all financial matters, and the causes are complex.

Blame it on the internet, their parents’ divorce, growing up in a recession, being raised on Disney movies or participation trophies -- but with an altruistic view of their future, Millennials have been a great topic of discussion since the media started reporting on their adult lives.

Over the past year, they’ve been moving into the next phase of their lives, and in turn, are planning for what’s next. This has led many Millennials away from big cities and into more affordable emerging markets.

Millennials Might Finally be Moving Towards Prosperity

“Whatever your opinion personally (of Millennials), as investors we need to focus on one astounding fact: we are witnessing the beginning of the greatest wealth transfer in U.S. history from the once-dominant Baby Boomers to the emerging Millennial generation,” explains Matt McCall in an article by Investor Place.

Millennials have since graduated from college and gained their first career-oriented jobs and have embarked on successful careers. Although Millennials are still plagued by student debt and a consumerism-focused society, their financial outlook is improving.

“With 73 million people, Millennials now account for 22% of the U.S. population and have overtaken the Baby Boomers. The most widely used definition of a Millennial is someone born between 1981 and 1996. That puts them between 23 and 38 years old right now …” continues McCall in the same article.

Millennials are now the largest living adult generation and they are entering their best earning years as professionals. They are starting to buy housing, but just not in the same places they’ve spent the last decade as renters.

It’s a Fact, Millennials Are Leaving Big Cities

Many Millennials have reached the difficult realization that their salaries cannot support big city life. For example, in California’s major metros, only three percent of Millennials can actually afford to buy a home.

However, according to data from the U.S. Census, the “homeownership rate for those under 35 was 36.5 percent in 4Q18, up from last year, but far below the 39.1 percent historical average.”

So how does that work?

Millennials are leaving the ultra-competitive big cities of their dreams and moving to small cities in record numbers.

“Data released by the U.S. Census Bureau earlier this week shows that some 27,000 millennials between the ages of 25 and 39 left big cities like New York, San Francisco and Houston in 2018 for greener, and less expensive pastures,” the Wall Street Journal reports. “Chicago, Las Vegas, Washington, D.C. and Portland, Oregon, are also seeing large numbers of residents leave,” reports CNBC.

Where Are The Most Affordable Markets for Millennials?

So where is the grass actually greener on the other side for Millennials looking to take control of their finances? About a dozen different cities stretching from the Northeast to the South, Midwest and the Sunbelt. Cities like Rochester, Des Moines, Omaha and Madison all offer decent population sizes,affordable home values, and competitive hourly wages.

Millennials make up 26.8 percent of the population of Madison. The city is ranked top five “in software publishing job concentration and developer salaries while still being two percent below the national average for cost of living. That's a rare combination. It's top 10 in best cities for young entrepreneurs. And Madison has the highest concentration of Millennial talent in the country,” explains Inc.

They also write that Madison is “the smallest big city in America and I mean that in the best possible way. It's a top 15 global city in access to venture capital per capita because of its connectivity.”

Now has never been a better time to capitalize on this fundamental demographic shift. Learn about Madison’s commercial real estate trends from PLUM’s experts on the ground.

Have more questions about commercial real estate trends? Click here to get in touch with one of our specialists to discuss your commercial real estate financing needs, or set up time on our calendar.

PLUM Lending is a full service commercial real estate lender that provides creative structured finance solutions for all property types. We specialize in the capitalization of middle-market commercial real estate properties nationwide with a focus on secondary markets. We provide borrowers with capital through our various direct lending programs as well as access to construction financing, mezzanine capital, and preferred and joint-venture equity investments.

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