A new report at Realtor.com says millennials are the future of housing and 2020 was the beginning of this new trend (Realtor.com)
- Millennials will be experiencing a massive wave of people turning 30 in the next few years. 4.7 million millennials turned 30 in 2020 In 2021, another 4.8 million members of generation Y will be turning 30 and that will be the case in 2022, 2023, and 2024.
- In a healthy real estate year there are about 6.0 million home sales meaning millennials could be 80% of the home buying public over the next 4 years.
On Tuesday, The U.S. Census Bureau released it’s quarterly data on homeownership in Q4 of 2020 and under 35 was significantly lower than other age groups (Census Bureau)
- UNDER 35: Is up 4% from 5 years ago , but was down almost 2% from Q3 to 38.5%.
- EVERYONE ELSE: 35-44 year olds saw a homeownership rate of 61%, 45-55 were at 69.8%, 55-64 were at 76%, and 65+ saw a homeownership rate of 80.2%.
Millennials are clearly ready to buy homes. So what could stop them? Affordability. The National Association of Realtors will release its next quarterly report on housing affordability on February 11, 2021. However, looking at the Q3 data its not hard to figure out the direction we are going.
- In 2017, the median home cost $248,800. With an average mortgage rate of 4.2% that meant a monthly payment of $973 dollars
- In Q3 of 2020, the median home cost $313,500. With an average mortgage rate of 3.0% that meant a payment of $1,059 dollars.
The good news is that rising home prices have been blunted by falling mortgage rates. So even though the median home has increased by 26%, the average mortgage payment has only increased by 8.8%.
Mortgage rates have already started inching up from the lows, but so has the economy. The CBO report on Tuesday found that economy is recovering quicker than originally thought. They now expect the economy to reach pre-pandemic levels by the middle of this year. A growing economy, and hopefully wages along with it, should help counter the impact of rising mortgage rates. If so, millennials will be primed to be the overwhelming majority of home buyers for the next 5 years. Assuming they can kick their avocado toast and starbies habit.