This is a theme that was repeated over and over at the National Association of Real Estate Editors spring conference. With the Millennial generation becoming the newest cycle of homebuyers, we have to wonder what phase of their lives will influence trends in real estate the most.
This story in the Washington Post really summarizes the issue well. So, when millennials decide to settle down and have a family, where will they settle? Will they make compromises and stay in the urban core, with its dense population and small footprints? Or will they eschew that lifestyle for more open space, a yard, and other typical suburban amenities?
More Millennials are deferring that first home purchase because of record high student loan debt, a shortage of inventory, and lending restrictions. This won’t surprise you if you’re familiar with the mortgage market, but down payments remain the biggest hurdle for first-time homebuyers, resulting in a phenomenon that Trulia economist Jed Kolko called “Millennials in the Basement.”
No, that’s not horror flick, it’s a real trend. More and more millennials are seeing the rising cost of renting (at all-time highs in some areas) combined with more lending restrictions and choose to shack up with their parents instead. And when they do move to urban centers, inventory problems force them to rent instead of buy. And homeownership rates among adults under 35 is at historic lows, with only a third of Millennials having a mortgage.
We see this frequently in Dallas. Still, with many apartment developments yet to come online, and with Millennials reaching a transition point in their lives, what do we do? Do we build more homes? More rentals? Or do we continue to do nothing at all and let the market correct on its own while banging on the floor to get Junior to turn the stereo down?
What do you think?