Lack of Attainable Housing Stymies Millennial Generation.
Why many would-be home buyers are renting — for now
Here’s the good news: Income growth among 25- to 34-year olds — the millennial generation — grew 5.6 percent last year. And first-time homebuyer loans are up. Millennials are buying homes and debunking the myth that they don’t want to be homeowners. High student loans are beginning to fade in the background and they’re marrying and starting families. With that comes the urge to have a home of their own.
While they’ve put off buying a home longer than other generations — the average age of a first-time home buyer is 33 — “the leading edge of millennial population is just now becoming the ‘new normal’ of home ownership,” observed U.S. Homebuilding Analyst with Bloomberg Intelligence Drew Reading at the Bloomberg Intelligence + Metrostudy Homebuilding Strategy Summit in March.
Entry-level demand is increasing
“As more [millennials] age, there’s huge demand behind home ownership,” he said. “This large base of population growth gives you the sense that demand for entry level, either in rental or the for-sale market, will be strong in the next several years.”
While some millennial buyers are purchasing more expensive homes in urban areas, most are struggling to get into an entry-level home. That’s because their income growth hasn’t kept pace with the price appreciation on the bottom third of homes on the market, generally considered entry-level homes. They’re paying 30 percent or more of their income on rent, which has made savings for many impossible. Read More >
Houston a bright spot for affordable homes
One of those hot markets is in Houston, where in the first quarter, it was the second-highest volume new home market in the country, according to Lawrence Dean, Metrostudy’s Houston regional director. The strongest volume of new home starts —25,789 — hovers in the $200-$299,000 price range.
DR Horton has been a popular builder among homebuyers, and closed 930 of its Express entry-level homes there last year alone. “They introduced the Express brand in Houston three to four years ago,” Dean explained. “It’s become a big enterprise in Houston.”
He also has watched builders and developers step up the pace on more affordable, new homes over the past ten months, by focusing on smaller, more-efficient home products. “They’ve realized most of that growth is centered around millennials who are entering a new life stage, and Baby Boomers who want to downsize to something more cost effective.” Read More >