Millennials are ready. The largest generation in this country, the sleeping giant, is waking. They have been tossing and turning in the effects of the great recession, the nightmare of student loan debt, the soreness lower wages have inflicted. They are stretching their long bodies, feeling their size. Their eyes are slowly peaking outward, to a world that is beginning to belong to them, the new stewards of earth are here. They want their own patch of land and shelter, and the security and investment needed to make their mark, their rock to lookout onto to a world that is ready for their full presence. They are ready to move, and the real estate market is ready.
Borrowed Land, Borrowed time
For years millennials have stayed on borrowed land, and borrowed time. They were deemed a generation of renters, signing lease after lease to prepare for their awakening, to make a lasting commitment to own a home of their own. As many have entered their 30’s, they are becoming more financially secure and starting families, the census projects that household formation will average about 1.5 million per year through 2020, up from the 900,000 annual average in the past five years.
They are looking to the evidence that homeownership is an investment in their future, in themselves, financial or otherwise. “Owning a home for a longer period of time creates more wealth,” said Christopher E. Herbert, managing director of the Harvard Joint Center for Housing Studies. “If you shrink that amount of time, you’re going to shrink how much wealth it creates.”
“After years of seeing millennials sit on the sidelines, it’s clear some are recognizing it might not make sense to wait,” said D. Steve Boland, Consumer Lending executive for Bank of America. “We talk to younger buyers every day about homeownership, and they understand the benefits it can have on their long-term finances. They’re excited to get started but are taking a thoughtful approach by improving their credit and building their savings.”
Exploring their options
Millennials love options. They are also adaptive to change. Since they have been starved from the housing market for years, they are hungry for change, and will weigh what’s important to them, the first being inclusion in the market. While millennials love living in cities, they are moving to suburbs to make that change, to own a home. What they love about the cities are those options they are accustomed to, so they are flocking to suburbs, outside of urban areas, that can have the best of both worlds. A survey from the National Association of Realtors showed that for millennials, buying in an urban or central city areas decreased from 21 percent to 17 percent. Unlike their parents, they are looking for suburbs with urban amenities such as yoga classes, health food stores and walkable downtown areas, close to parks and natural areas. They also don’t want long commutes. “People want more urban perks,” says Alison Bernstein, founder and CEO of Suburban Jungle. “They don’t want to be isolated. They don’t want to feel alone. They want to be part of a community. … They really want walkability. They love great downtowns.”
Rise and Shine
The housing market is ready and waiting for this surge of new home buyers. This influx will also allow current homeowners to buy up to the homes of their future, many of them the parents and grandparents of this generation. When the housing market does well, everyone does. Millennials will move quickly, and assertively. They know what they want and they want it now. They are getting their feet beneath them, and the earth will begin to shake. They are a powerful force of creativity and connection. They will now be looking for that security from which to root themselves and grow even large, a giant in social and economic life, is waking.
The Tortoise and The Hare, 2017’s Generational Real Estate Race!
In the old Aesop fable, the quick and confident hare would be the, self assumed, glorious champion of their impending race. His ingenuity, trickery, and speed was hard to match. The tortoise, in his deliberate doggedness, slowly moving, but always in the direction of his goal, ended up crossing the finish line first, while the hare slept on his obvious advantages and assumed outcomes. Can this tale be a primer for the impending generational race in the 2017 housing market? Will the quicker moving millennials learn from the hare, and stay focused to the end of their race with the slower, more persistent, baby boomers? The race begins fully this spring, and may not last as long as the tortoise would like.
Both of our largest generations, the boomers of 77 million and the millennials of 83 million, are set to dominate the housing market in 2017, with millennials making up 33% of projected purchases, and the boomers projected to come in with 30% of all home purchases. Both generations are motivated to buy. The oldest millennials are approaching their mid 30’s, and are becoming primed to settle down, with many marrying and having kids. There are also more jobs being created for 25-34 year olds than any other age group. This stability in jobs is fostering a desire for stability in living accommodations. Many boomers, in contrast, are retiring. Some want to downsize, to control their expenses, while others are moving to the biggest homes they’ve ever owned, to make room for children and grandchildren to visit, even moving to be closer to them. The market demand is there, but what of the supply? How much of the trail do they have to race?
The housing inventory is down an average of 11% in the top 100 markets nationally. This lower supply is creating an even higher demand, with homes projected to sell 2 weeks faster than a year ago (Natl. Assoc. Of Realtors). In addition, with interest rates expected to slowly increase, the quicker the better, for those looking for the best long-term investment. With fewer homes, moving more quickly, competition for available homes will be high. But when will the race begin? Statistics show spring is when the starting gun echoes throughout the housing market, with homes more available for pleasurable viewing, a shift in seasonal consciousness encouraging change, and inventories at their highest for the year. During May 1 through 15, homes sell 9 days faster! Spring is here! The race has begun.
With the market moving fast, that is an advantage to millennials, who enjoy expedience and a disdain for delay. They, however, prefer to keep their time and commitments flexible longer, in order to take advantage of better options (New Jersey Institute of Technology). This may be an advantage to the more home buying experience of boomers, though millennials are very well researched and may realize the urgency to commit. Millennials also learn by doing. Boomers do have the wisdom of experience, and the spending power, with many already owning homes and having the credit and equity to work with. Though, lending is expecting to increase with the forecasted deregulation plans of the new presidential administration. So many variables, only time will tell..
The Hare was once boasting of his speed before the other animals. “I have never yet been beaten,” said he, “when I put forth my full speed. I challenge anyone here to race with me.”
The Tortoise said quietly, “I accept your challenge.”
“That is a good joke,” said the Hare; “I could dance round you all the way.”
“Keep your boasting till you’ve won,” answered the Tortoise.
“Shall we race?” (Aesop)