The long-time perennial home renters, who were regarded as reluctant or unable to buy houses, are now resurfacing as the driving force behind the recent U.S housing market recovery. Housing demand from millennials, who are today aged between the mid-20s and late-30s, has had significance to the housing market witnessed since the middle of the last decade. However, more recently, this new category of homebuyers has had more influence in the housing market than older generations.
According to Realtor.com, the group first accounted for more than half of all new home loans at the beginning of last year, which they also retained in the first months of this year.
Millennials made up 38% of homebuyers in the year that ended July 2019. This number was up from 32% in 2015, according to the National Association of Realtors.
Elsewhere, according to data from Pew Research Center, millennials surpassed baby boomers as the largest living adult generation in the U.S last year. According to per, the largest cohort of millennial births occurred in 1990, meaning that they turn 30 sometime in 2020.
“We anticipate as they turn 31 and 32, we’ll just see home buying demand grow,” said Odeta Kushi, deputy chief economist at First American Financial Corp. Kushi also added that millennials are likely to be responsible for at least 15 million home sales in the next decade.
The current millennial homeownership trend challenges the years of projection by experts after the 2007-09 recession. Experts had speculated that millennials would be stuck renting perpetually, impeded by student loans, and careful of the housing market after the foreclosure crisis.
The housing growing demand mainly comprises younger millennials, who are now entering 30s and starting to buy homes more actively. This trend is more in line with the ages of the groups that preceded the millennials (the baby boomers and Generation X) began to buy homes.
“Millennials, they’re roaring into homebuying age,” the chief executive of mortgage lender New American Funding, Rick Arvielo said. “What the industry’s been talking about for a decade is whether they’re going to follow their predecessor generations in terms of their desire to own homes,” he stated, adding, “Yeah, they do—they have the same desires.”
Home sales remained on the path of recovery in July, facilitated by younger buyers. This saw sales of previously owned homes surge almost 25% in July to their highest seasonally adjusted annual rate since December 2006. Reports from NAR indicated that 34% of sales in July were from first-time homebuyers, up from 32% last year.
Demand for homes is growing among Americans of all ages due to low-interest rates, and the growing desire for more space as the COVID_19 pandemic has compelled more people to spend more time at home. However, many millennials, especially parents of young families, have additional motivating factors. Also, buying a home is cheaper than renting in the long-run in most parts of the U.S.
A healthy housing market can be a positive indicator for the economy since home purchases come with increased spending on furniture, appliances, and remodeling or renovations. As the demand is growing, home builders have also responded to it by increasing their activities. Some experts have pointed out that the strengthening housing market is the driving force for the country’s stock market resurgence, despite the continued effects of the pandemic, such as unemployment.
Meanwhile, it is not guaranteed that the millennial’s robust demand will last for long. The current recession has served a major financial setback for millions of young workers who lost their jobs amid the pandemic. The significantly high unemployment rate among millennials is a possible cause that could affect their home buying rate in the future.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.frazier@fbol.com. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
President and CEO
The Power Is Now Media Inc.
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