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CASE STUDY
Lack of Attainable Housing Hindering Millennial Generation
Written by Kim Jackson, MetroStudy May 25, 2017
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 rst-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 rst-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.
Low savings rates keeps buyers sidelined
In fact, ISI Group’s Homebuilding & Products Analyst Stephen Kim said that between 30 and 67 percent of all renters are saving $0 a month, due mostly to high rents squeezing their abilities to save.
“Today’s savings are tomorrow’s down payment,” he said during the Bloomberg Intelligence + Metrostudy Homebuilding Homebuilding Strategy Summit.
When they can save, expectations for
a down payment are unrealistic. An Apartment List survey of 30,000 millennial renters from November 2015 to February 2016 showed, for example, that millennials exwpected a 20 percent down payment
on an entry-level home in Seattle to be around $26,800, when it was $49,995.
The survey, which covered 93 metropolitan areas and 130 cities nationwide, also re ected that affordability is their biggest concern: 79 percent of millennials want to buy a home, yet they can’t nd affordable housing.
With constrained supply of entry-level resale and new homes, many would- be buyers are stuck on the sidelines, chomping at the bit to get in the homeownership game.
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