All those Millennials who moved in with their parents after college may finally be ready to move out and buy their own homes, say researchers at Harvard’s Joint Center for Housing Studies.
Over the next decade, the number of households headed by people in their 30s should increase by 2.7 million. This will provide a strong lift to the starter home market.
“Ultimately, the large millennial generation will make their presence felt in the owner-occupied market,” said Daniel McCue, research manager of the Joint Center, “just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and property values increased by double digits for the fourth consecutive year in 2013.”
A BMO Harris Bank survey confirmed what Harvard predicts. It found 32% of 18- to 34-year-olds plan to become homeowners over the next year. A whopping 74% of millennials said they expected to be homeowners within five years.
Who Plans To Buy A Home?
|Timeline for Purchase||Ages 18-34||Ages 35-44||Ages 45-54||Ages 55-64||Ages 65+|
|Next 12 months||32%||21%||6%||7%||5%|
|Next 2 Years||45%||37%||18%||13%||11%|
|Next 5 Years||74%||62%||35%||31%||19%|
Source: BMO Harris Bank poll
Meanwhile, aging baby boomers will lift the number of households aged 65 and over by some 10.7 million.
“Many of these households will choose to make improvements and modifications to their current homes so that they can age in place, while others will seek out new housing options geared toward seniors,” the Harvard researchers said.
The conditions that have held back the real estate recovery appear to be ending. “Steady employment growth will give more potential homeowners the ability to buy, while rising home values will encourage more households to act on that ability before prices climb even further,” the Harvard researchers said. “The share of distressed homeowners is also on the decline, reducing the number of households forced to move out of homeownership.”
First-time homebuyers continue to be challenged by tight credit, reduced immigration and a weak job market, but the U.S. housing recovery should regain its footing this year. “The housing recovery is following the path of the broader economy,” said Joint Center Research Director Chris Herbert. “As long as the economy remains on the path of slow, but steady improvement, housing should follow suit.”
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