Millenials Poised to Take FlightPosted 08/08/2014
Much has been written about the plight of the Millenial generation and its effect on household creation. Saddled with student debt and struggling to rise above a weak job market, today’s young adults have stuck around at Mom and Dad’s house a bit longer than their predecessors before striking out to purchase a home of their own.
But a recent report by Harvard’s Joint Center for Housing Studies suggests slowly improving market condtions, coupled with the sheer number of young adults coming of age within the next decade, should increase the ranks of first-time buyers and give Millenials the boost they need to leave the nest.
According to the study, the number of households comprised of 20- and 30-somethings is projected to increase by 2.7 million between 2015 and 2025. Overall, Millenials could be responsible for forming 24 million new households over the next decade as the economy continues to improve and existing obstacles begin to fall away. If this happens, all levels of the housing industry will benefit.
"If somebody wants to move up from a starter house to a larger house, they need someone to sell the starter house to," said Mike Calhoun, president of the Center for Responsible Lending, during a panel discussion following the release of the report.
Young, first-time homebuyers have been hesitant to enter the housing market since the recession. The Pew Research Center estimates approcimately 11 million recent graduates were living with a parent in 2012. The homeownership rate for those under age 35 was 36 percent in the first three months of this year, down from a high of 43 percent in 2005, the Census reported. In fact, 2.1 million more young adults lived with their parents last year than what industry watchers expected, based on pre-recession household formation rates.
“Ultimately, the large Millennial generation will make their presence felt in the owner-occupied market,” says Daniel McCue, research manager of the Joint Center, “just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and property values increased by double digits for the fourth consecutive year in 2013.”
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