While the housing market might be lightly tapping the brakes as of late, a new report found that a wave of new buyers is coming — although how robustly they arrive will vary from city to city.
While there was an impressive wave of first-time home buyers over the last decade, Zillow did the math and found that in the next 10 years, an extra 3.11 million people will be at that prime first-time buyer age — 34.
“From 2019 through 2028, 44.9 million people will turn 34, the median age of current first-time home buyers,” Zillow said. “That’s an increase of 7.4 percent from the past 10 years, when 41.8 million people passed that threshold.”
Now, sure, not all of these prospective new buyers will actually be clamoring to buy homes when they hit their mid-thirties, that huge influx in potential buyers will definitely have an impact on the market. The largest three-year generational group in the U.S. right now is only 24 to 26 years old — which means that the increased strength of their potential buying power has not been realized yet.
In Dallas-Fort Worth, it’s estimated the metro area will see about a 3.1 percent increase in potential homebuyers in that age range. Other major metros in Texas will also see increases — Austin and San Antonio well each see an estimated 14.2 percent increase, while Houston will see a 6.1 percent increase.
In fact, almost all the major metros Zillow researched will see an increase of some sort — only Charlotte, North Carolina; Washington, D.C.; Atlanta, Georgia; and Portland, Oregon will actually see decreases.
The median age of new homebuyers also varies by city. In Dallas, the average first-time buyer is 36 years old, as is Austin, Houston, and San Antonio. But in San Francisco, the average age is 37, New York City is 34, and Los Angeles is 33.
But what does this all mean? For one, it means that prices could continue to increase over the next decade, and that rate will likely depend on how many more prospective first-timers are expected for that city.
If inventory doesn’t keep pace with demand (which historically, we all know it hasn’t), that median age for first-time homebuyers will continue to be later and later. Housing supply isn’t increasing rapidly enough to account for the additional influx of potential buyers and the baby boomers who have been more inclined to age in place as of late.
This also means that rents will continue to rise as, in turn, more would-be first-time buyers put off buying a home until a little later in life. Luxury units continue to be built at a more rapid pace than affordable units, too, which also impacts rental rates.
In Dallas, at the end of 2018, we reported that most of the apartments in Dallas are occupied currently, and rent growth continues according to the Yardi Matrix Multifamily National Report for 2018.
Nearly 95 percent of Dallas apartments were occupied in October 2018, with yearly rent growth hitting 2.1 percent in November 2018. It is expected to grow by 4.4 percent in 2019.
“This is a huge generation and the rate of multifamily building, as aggressive as it seems for anyone watching the skylines of urban areas, does not make up for years’ worth of shortfall when more capital was being directed to single-family building during the housing bubble,” Zillow said.
To see more of the report, click here.