- Millennials will continue to fuel a housing frenzy for years, an economist said.
- But there aren’t enough homes for all the millennials who want to buy them.
- That means “higher prices may be the norm” until supply catches up to millennial demand.
We’ve only seen the beginning of millennial housing demand.
That’s the prediction of Dana Peterson, chief economist at non-profit The Conference Board, who wrote about how millennials are driving today’s housing frenzy in a recent article for Barron’s. After spending years struggling to save for a down payment thanks to the fallout of the Great Recession and a mountain of student debt, the generation has finally reached peak age for homeownership as most of them enter the precarious life stage of their 30s.
It’s likely that the housing frenzy will continue thanks to rising incomes, remote work, and a robust economy, Peterson wrote. “The sheer size of the millennial population, and the fact that they are just entering peak years for starting families and earning money, means that demand for housing has room to run,” Peterson told Insider.
As they work from home and grow their families, many millennials are seeking more space. They’re also seeing more money in their pockets as they finally make strides in building wealth and shrinking their debt, according to Peterson. Thirty-something millennials only have $874 in student debt, compared to the youngest millennials who have $22,953 on average, per the Education Data Initiative. Coupled with historically low interest rates, millennials were ready to buy.
A record number of millennials wanted to buy homes in 2020, according to a report from First American from earlier this year. The report found that as millennials became more financially stable with age, their potential homeownership demand has increased by 3.5 percentage points year-over-year, more than any other generation. It explains why data from the National Association of Realtors (NAR) revealed that millennials comprised the largest share of homebuyers in the past year, at 37%.
The only problem is the real estate market can’t keep up.
More millennials than homes
Millennial demand fueled a housing boom that morphed into a housing crisis marked by a severe shortage of homes and supply-chain issues. Prices for the homes that are available continuously climbed upward before reaching a record high of $386,888 in June.
While signs indicate that the …….