Following a year of historic low homeownership rates, the housing market is expected to pick up over the next year, thanks to an unlikely home buying group: Millennials. With continued job gains and a relatively low unemployment rate, the boost in demand for housing will be predominantly fueled by America’s youngest demographic, according to forecasts from a National Association of Realtors (NAR) conference published Friday.
“NAR surveys from both current renters and recent buyers prove that there’s an overwhelmingly strong desire among the younger generation to own a home of their own,” NAR chief economist Lawrence Yun told an audience at the conference, according to a NAR press release. “The housing market over the next couple of years should get a big lift in demand from these new buyers.”
Yun’s projections, presented along with positive forecasts for the general housing market through 2017, support other groups’ findings of a housing demand rebound among millennials, usually defined as those aged 18 to 34, over the past couple of years.
Though the 2008 financial crisis pushed down growth in homeownership rates across age groups between 2006 and 2012, older millennials in their late twenties and early thirties saw accelerated gains between 2012 and 2014, according to research from the Federal National Mortgage Association, also known as Fannie Mae.
People under the age of 35 experienced disproportionate declines in homeownership rate in the years after the recession compared to those who are older, who only saw moderate decreases. The homeownership rate's change in percentage became positive for people under 35 and stayed negative for those who were older between 2012 and 2013, a report from the New America think tank found.
The NAR’s optimism for the pickup of the housing market recovery came with a catch, however. Many of the new buyers at the root of 2017’s market growth will be looking for homes within their early-career budgets, and there may not be an ample enough supply to meet their demand.
“The one caveat,” Yun continued, “is it’s essential that there’s enough new and existing supply at entry-level prices for them to reach the market.” He estimated the supply of newly-constructed homes would rise 5.3 percent to 1.22 million in 2017 — 2.8 million short of expected demand.
Much research has pointed to the likelihood that millennials have long awaited the purchase of their first home, but simply couldn’t afford to take the major life step. Today’s first-time homebuyers are, on average, several years older than first-time home buyers in the 1970s, according to a study from realty research firm Zillow. For the first time in modern history, bunking with parents became the primary living arrangement for people ages 18 to 34, according to the Pew Research Center.
Despite these historic lows, an Allstate/National Journal Heartland Monitor study found that, among Americans aged 18 to 24, 72 percent see home ownership as “a smart and achievable long-term financial decision.” That included 62 percent of 18- to 24-year-olds who were still renting.