Time for Millennials to Make Their MovePosted 03/10/2015
Could this be the year Millennials move out and up into the single-family housing market? Some experts believe the answer is “yes.”
According to Jonathan Smoke, the National Association of Realtors’ chief economist, the constraints that have been holding back this influential segment of the first-time homebuyer market are finally beginning to ease. Unemployment, which reached a high of 10.6 percent for 25- to 34-year-olds, has fallen to 5.9 percent. Housing affordability remains strong in markets such as Chicago, Dallas, Atlanta and Philadelphia, which coincidentally have a large Millennial population. And saner mortgage lending standards – as well as lower mortgage insurance fees – have made it easier for first-time buyers to qualify for loans.
“With these factors on their side, I expect Millennials to represent more than two-thirds of all new households over the next decade,” writes Smoke in a recent Fortune.com commentary. “And 25- to 34-year-olds, in particular, will drive as much as half of all new home sales this year.”
Already, it appears Millennials are gearing up to jump off the fence. According to a Los Angeles Times article earlier this year, 57 percent of the house-hunters who toured homes with Redfin agents in January were first-time buyers. Real estate agents nationwide report seeing higher-than-usual activity among first-time home buying prospects. And Redfin reports that 24 percent of millennial homebuyers obtained a second job to save for a down payment on a home.
Why the keen focus on this generation, whose members were born roughly between 1980 and 1997? Millennials are the largest generation so far – bigger, even, than the Baby Boom generation – and they will impact America’s housing market significantly. Smoke states that approximately 3 percent of 25- to 34-year-olds were able to purchase a home in 2014, compared with 5 percent in 1980. With the larger number of 25- to 34-year-olds today, a 5 percent purchase rate last year would have increased home sales by more than 15 percent, and would have represented a 40 percent share of all home sales.
An increase of this size could go a long way toward returning the U.S. back to normal levels of both new- and existing-home sales. While Smoke says he does not expect to see a full housing-market recovery this year, putting Millennials in the driver’s seat as first-time buyers could help propel us farther down the road than we have traveled in years past.
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