College Grads Hit the Houston Real Estate Market

Posted by Chris Clothier on Tue, Jun 3, 2014

investmentopportunities collegegradsMillennials don’t have it as easy as we like to think. Recent college graduates deal with a slew of financial stresses thanks to the state of the U.S. economy and it appears that buying real estate is only one of those stresses. It feels nearly impossible to attend college without incurring some amount of student debt, and the job market, while improving, is still challenging. It’s hard to start a life and find success if you can’t find a job with that new degree.  If you can't find a job, then you sure can't buy a first home much less invest in real estate.  

A recent CNN Money article on Millenials, pointed out that they are being squeezed out of the buying market and forced into the rental market or worse...living with their parents.  And don;t think we are talking just young 20 somethings either.  Millenials now reach into their thirties with many getting extended degrees and attending Masters programs and incurring student loan debt at staggering rates.

Some cities, however, are seeing a noticeable influx of college graduates. Between 2007 and 2012, there was a 16% increase of college graduates coming to live in Houston. A gain of 185,012 in the population, and each and every one a recent grad. Those millennials are entering the Houston real estate market, and that’s not something investors can afford to ignore.

Why does it matter to us?  After all, you are reading a Memphis real estate blog.  But earlier this year, we moved into the Houston market and are now up to 40+ properties under management in the area and averaged purchasing 10 properties for investors to purchase as investments from us the last two months.  As we continue to grow as a company and offer new opportunities in new markets, it is important that we as a company and you as investors know what is driving the market and where the market is heading.  Millennials are an important factor in the future growth of a cities real estate market.  They begin by renting and eventually move into purchasing so  understanding their motivation and ability is very important to understanding where a market is moving.

Millennials and Houston Real Estate

For many young college grads, moving into the workforce is a difficult and stressful transition. Even for those who find employment are faced with tough questions. In the past, buying or, at the least, saving up for a home was a no-brainer. Over the last few years, renting has become a more popular option across the board — but particularly for Generation Y.

When recent grads are dealing with college debt, they can be wary of taking out another loan to cover mortgages. Student-loan debt in general has been dragging the economy down. According to the New York Federal Reserve, from 2009 to 2011 only 9% of those ages 29 to 34 were approved for first-time mortgages. In Houston, the housing market is fast-paced. While home prices are lower in Houston than in many places, it still may be difficult for college graduates to get approved for a loan, let alone consider buying a home unless they have a particularly good job or considerable savings. 

Even with an improving job market, job security is often uncertain. Millennials rent for many reasons — perhaps they simply don’t want to be further burdened by debt, can’t afford to buy, or they value their mobility. In the beginnings of a career, college grads may not know if what they’re doing is what or where they want to be for the next 10, 20 or 30 years. It also helps that they can have roommates when they rent to help cover expenses.

What Do College Grads Need in Housing?

Affordable rentals. Rent in Houston is not cheap for young professionals just getting started. While you should never under price yourself in any real estate investment, the lack of reasonable rental prices is troubling. College graduates generally aren’t looking for rambling condominiums or homes — they’re looking for starter homes and rentals close to their jobs.

Get to know your market. For Houston real estate investors, that means getting to know what college graduates want and need from their housing options. As a real estate investor, you can ideally provide appealing accommodations at lease prices that are fair to your renters and profitable for you. 

How has the influx of renting millennials affected your real estate investments? Tell us in the comments.

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image credit: Agnes Scott College


Topics: real estate investing, Memphis Invest, real estate investment, houston real estate, Millenial