When it comes to commercial real estate, there’s one segment that seems to be growing everywhere: multifamily.
Apartment complexes and condo units are cropping up all over the region, and many real estate experts credit that to the fact that many people—particularly those in the younger generation—would rather rent than buy.
Nationally, it seems millennials — those born between 1982 and 2004 — are delaying their entrance into the world of home ownership. But, does that same trend hold true locally?
The traditional American dream might include a front yard with a golden retriever and a white picket fence. But, that same ideal might not be the fantasy for millennials, who many studies say are delaying both marriage and home ownership.
Of course, having watched their parents go through the financial crisis, it’s understandable this younger generation would be hesitant to take on a mortgage. Crushing student debt is another financial consideration that holds many millennials back from purchasing.
“Student loans are another factor,” says David Belman, President of the Wisconsin Builders Association and Belman Homes. “Because of their student debt, they don’t have a down payment, which makes it a little more challenging for them to buy.”
Finally, many are quick to cite lifestyle choices as a reason for pushing off the home buying process.
“They’re really about the experience,” Belman says. “They have certain things they want to do in their life before they get settled down, so they’re waiting longer. Some of it is financial, and some of it is just an experience that they want to have with their lives.”
The local economy
Home construction is big business here in Wisconsin. From property tax dollars flowing to local municipalities to jobs for those in the construction industry, the building of new homes plays a big role in our economy.
According to a 2009 economic impact study conducted by the Brown County Home Builders Association, the estimated one-year metro area impacts of the construction of 1,000 single family homes in Wisconsin include:
• $180.7 million in income for Wisconsin residents
• $29.8 million in taxes for state and local governments
• 3,255 jobs in Wisconsin
A large slowdown in the home construction industry would have noticeable impacts on the health of our local economy. So, are new housing starts actually slowing down?
Despite what the nationwide trends might suggest, most home builders in the area assert that things are still solid — if not even better than before.
“We expect this year to be one of the busiest years we’ve ever had,” Andy Uecker of RUCON Construction Management Inc., says.
Building permit data for the region does show a positive trend for new construction. While nowhere near the highs of the early 2000s, permit data for the five metropolitan statistical areas comprising the New North shows steady increases in the rate of single-family home construction between 2009 and 2015.
“This year, I can see an increase in new construction,” Belman says “Just in the first part of the year so far, the number of leads and the number of people coming through the doors has been larger than it has been in the past by a large margin.”
Locally, it seems, the assumption that millennials would rather rent than purchase is somewhat of a myth.
“We have three millennials who work for the Brown County Home Builders Association, and all of them own homes.” Mari McAllister-Charles, executive officer of the BCHBA, says.
In fact, Uecker estimates that 60 to 70 percent of the homes his company has built in the past five years have been purchased by or built for millennials.
Encouraged to purchase
“I see a lot of millennials purchasing instead of renting,” Uecker says. And, a lot of that might have to do with the financial industry’s focus on appealing to younger loan recipients.
While there are no longer any programs where first-time homebuyers receive a credit as there were a number of years ago, millennials have available numerous avenues to help them better understand and qualify for a mortgage — including offering lower down payment options.
Plus, with online applications and remote banking, it’s now increasingly convenient for the younger generation to get the information they need when they need it.
“I do think the advertising of mortgage loans tends to focus on millennials,” says Deb Henschel, AVP, senior mortgage officer at Johnson Bank and treasurer of the Home Builders Association of the Fox Cities. “It appears banking in general has promoted the ease of banking toward millennials. Most times I do not even meet my clients until we are at the closing table.”