Since the end of the recession, millennials have been moving out of theirparents' basements and renting, but now they too want tobuy, First American Financial Corp.'s chief economist MarkFleming tells GlobeSt.com. In a recent report from the firm,Fleming says as more and more millennials marry and have children —among the strongest determinants for the desire to be a homeowner —demand for housing will remain robust.
|Fleming adds that while the housing market faces a dilemma thatis restricting the inventory of homes for sale thanks to theincreasing cost to finance a mortgage, wage growth has been at 2.5%over the past 12 months, and unemployment at its lowest level sinceMay 2001. This means that economic conditions that favor millennialhousehold formation will continue to drive strong demand, despitedecreasing affordability.
|Fleming says there is evidence that millennial householdformation is on the rise. “The data on household formation hasshown a significant amount of growth in new rental-householdformation since the end of the recession, while there has beenbarely any growth (until just recently) in new owner households(see the chart below). Since the end of the recession, millennialshave been moving out of their parents' basements and renting, butnow they too want to buy.”
|The data on household formation has shown a significant amountof growth in new rental-household formation since the end of therecession, while there has been barely any growth (until justrecently) in new owner households. (Chart courtesy of FirstAmerican Financial Corp.)
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Fleming says the expectation is that millennials will tocontinue to age into ownership as they get married, form familiesand enter their early 30s. “That seems to be the sweet spot forfirst-time homebuyer millennials.”
|He does see the percentage of people who own homes versusrenting increasing significantly in the future. “Many of the rentalhouseholds that have formed since the end of the recession willwant to make that transition to ownership. The housing market islikely to benefit for the next decade from the demographic tailwindof millennial homeownership demand. Later than prior generations,yes, but not at all dissuaded.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
