Millennial Homebuyers

Nationally, about half of American homebuyers are under 36, according to the latest study on consumer trends from Zillow, putting them squarely in the Millennial camp, born from the early 1980s to the early 2000s.

Mail surveys from the National Association of Realtors indicate that first timers account for about 32 percent of all buyers, and Dallas Builders Association member builders ranked Millennials behind Generation X and Baby Boomers as their most common buyer in a recent survey.

The contrasting studies may be related to the methodology, but the Zillow study provides optimism about Millennial homebuyers.

Millennials have been slow to buy their first house—housing economists call this “delayed household formation” and cite it among Millennials as one of the biggest reasons we saw a slow housing recovery nationwide.

According to the National Association of Home Builders, 65 percent of Millennials hope to buy a single-family home. But this age cohort experienced the largest decline in homeownership rates since 2006. In fact, only 34.1 percent of Millennials own a home, down from 39 percent in the second quarter of 2010, according to the most recent U.S. Census Bureau’s Housing Vacancy Survey, which reported data from 2010 to 2016. A recent Pew Research Study further shows 32 percent of Millennials still live with their parents.

How do Millennial homebuyers fare in DFW? We’re experiencing record growth and are on track to add more than 100,000 jobs this year, causing price increases, especially for new homes. The median closing price for a new detached home in the Dallas-Fort Worth region increased 5.4 percent year-over-year to $305,637 in August, compared to the median closing price for an existing detached home, which is now $217,360.

“Market demand, increasing local regulations, and an ongoing labor shortage are all reasons why the average new home is more than $88,000 more expensive than the average existing home,” said Dallas Builders Association Executive Officer Phil Crone. “Obviously, that kind of premium is going to make it difficult for most first-time homebuyers to step into the new home market. We need to ensure our market and our industry meets the needs of Millennials as they hold the key to our region’s continued prosperity.”

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A quarterly report from Metrostudy says Dallas-Fort Worth new home construction was up 7 percent, and closings on new homes up 9 percent, in the third quarter July, August, September, compared with the second quarter. And housing starts were up 6 percent from the same period last year. Analysts now says the market is coming down off the post-home buyer tax credit bottom that occurred in the first quarter of 2011, almost like withdrawal. David Brown, director of Metrostudy’s Dallas-Fort Worth office, says he continues to hear that sales are sneaking higher than for the same months of 2010.

Home builders closed sales of 3,805 new homes from July to September, and started construction on 3,839 homes.

Last week I told you about the “sweet spot” of pricing on new home sales up in Allen. Hillwood broke ground on the last phase of Twin Creeks; StarCreek and other Allen developers are breaking ground and moving dirt like crazy, I caught up with Hillwood’s president, Fred Balda, who told me it’s not surprising, in times like these, to see consumer home demand in the great master planned communities. It also helps that we have jobs in Texas, particularly tech jobs, drawing in buyers.

What drives the band for our Allen business is employment in the George Bush corridor,” says Balda. “We’ve hit a bit of a dip, but we are still positive. And you need new jobs to create buyers for these homes.”

Last year, says Balda, Hillwood, with 60 major residential master-planned communities across the continental U.S, Hawaii and Costa Rica, only started 300 new lots in Dallas Fort Worth. Tough year. This year, the company has doubled the number here. In the golden years of the boom peak, Hillwood was churning out 1500 lots a year in D/FW.

It’s not just jobs: another Allen draw, says Balda, is great schools, especially “one neat high school that is like a mini-college.” There’s great retail, shopping and restaurants. 

Twin Creeks is the tail end of a development started back in 1993; only 60 lots left to develop, then it’s a completed community adding to the heft of Allen. As a city, Allen saw 425 new home starts in the last 12 months. There are about 800 lots on the ground right now, or an 18 month supply. Equilibrium for this area is 24 months, says Balda, so Allen is actually below equilibrium.   

And Balda agrees: the sweet spot of home sales in this area is below one million. When I asked where the buyers are coming from, he said  20 to 25% are move up buyers coming from other parts of the market — moving away from the private schools, perhaps? — as well as relocations.

Texas is a good buy, f you have great credit,” says Balda. “At this price point housing here is still very competitive with interest rates so low.”

And the upscale dirt here is not too shabby when it comes to sales. The only gated area in Twin Creeks is exclusive Wimberley, where sales are also cooking. Wimberley’s lots are larger and pricier, with homes ranging from $1 million to $3 million: only 50 left to sell. Who’s buying? Upscale buyers — remember, there are plenty of them — businesspeople and professionals who love the hillier terrain and living near ponds and creeks.

I’m just glad to see the dirt flying.