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Redfin blames millennials for the housing shortage

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home buyer millennial

We’re all accustomed to blaming millennials for Coachella, job hopping, and safe space demands, but increasingly, they’re being blasted for their role in housing.

Today, Redfin released survey results expressing how this generation impacts housing differently than their predecessors, and how each generations’ attitudes toward homeownership differ.

Before playing the blame game, let’s outline how Redfin says millennial homeowners are different:

  1. “Millennials are more bullish about home prices,” Redfin states, asserting that the majority (86 percent) of homeowners under the age of 35 believe home prices will increase in the coming 12 months. Fully 24 percent of homeowners over 35 said prices will stay the same, only 11 percent of millennials agreed.
  2. Affordability is less of a concern for millennials, with 63 percent saying they’ll be able to afford living in their city in a decade, while only 51 percent of those aged 45 to 54 said the same. Any generation that feels they’ve “seen this movie before” is likely to be more apprehensive.
  3. Millennials are on the move. Over half said they’ll leave their current home within five years, with only one in four Boomers saying the same.
  4. “Millennial homeowners are more likely to be ‘house rich’ in the future,” which Redfin attributes to historically low mortgage rates. “For millennial homeowners, cheap borrowing and bullish price expectations will lead to a mass generational rethink about when and how to trade up from a starter home.”
  5. Millennials are more likely to become landlords, with 28 percent planning on renting out their home when they move instead of selling it. Compare that to only four percent of homeowners over 55 that plan on being landlords.

This echoes other sentiments

NAR Chief Economist Dr. Lawrence Yun said in his recent economic forecast, “Current homebuyers are the luckiest in generations on mortgage rates.” That said, he admits that student debt, inventory, high rents, and increasing home prices (affordability) are “hurdles” that still need to be overcome.

At the recent National Association of Realtors Legislative Meetings & Trade Expo, a tremendous emphasis was put on student debt plaguing the real estate and economic recovery, but with the bullish nature of Millennials reported by Redfin, the big sin of this generation isn’t a lack of interest in homeownership, rather a thirst for it.

“For the lucky few millennials who can afford to buy in the current bull housing market, there’s a lot of upside to holding on to their starter homes,” said Redfin chief economist Nela Richardson. “Rising rents, short tenure clocks, bullish price expectations and rock-bottom mortgage rates make housing a good permanent investment for millennial homeowners. This preference by millennials to rent out their home instead of selling it will likely ensure that the chronically low supply of homes for sale remains a persistent feature of the U.S. housing market.”

Redfin concludes that “One thing is for certain: a persistent shortage of homes for sale is yet another thing we can soon blame on millennials.”

#Millennials

Lani is the Chief Operating Officer at The Real Daily and sister news outlet, The American Genius, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

Real Estate Big Data

NAR Chief Economist predicts housing market uncertainty

(BIG DATA) Warning bells on the housing market have been ringing for over a year. While this prediction isn’t a surprise, it’s disappointing news.

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Multitude of colorful homes representing housing market.

The housing market is booming. Many experts are concerned about another bust like we experienced in 2008, but the conditions are much different today. Homeowners aren’t extended like they were when the market crashed in 2008. National Association of Realtors® Chief Economist Lawrence Yun suggests that the housing market is still uncertain, even though he says, “housing kept the economy afloat” during the pandemic.

What is impacting the housing market? 

Yun cites record-low inventory and inflation as “curveballs” to the housing market. Many economists, including Yun, have been concerned about low inventory for many years, especially in certain markets. Even though builders are working hard to construct new residences, supply chain and labor issues are not accelerating the process.

Yun is more concerned about inflation impacting the housing market. He says,

“wages have risen by 6% from one year ago…but inflation is 8.5%.”

Rising mortgage rates have made mortgages cost $300 to $400 a month more, according to Yun. Many working families can’t afford that. Yun predicts inflation is going to be high for several months. The market will slow as the Federal Reserve raises rates.

Yun also cites the Russia-Ukraine war as another contribution to the uncertainty of the market. The war is also driving inflation, not just overseas, but in the United States. With gas prices climbing higher each week, this is impacting the housing market.

Is real estate a good investment in this market?

Last year, when Yun opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo in San Diego, he expected the “housing sector’s success to continue,” but he did suggest that 2022’s performance wouldn’t exceed 2021s.

“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”

There’s a lot we don’t know about the future. It’s disappointing to think that the housing market may be uncertain, but real estate is still a good investment.

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Real Estate Big Data

Housing starts stagnate, market conditions are rapidly shifting

Housing starts for April stagnated, marking the second consecutive months of declines, and more renters being left out of this shifting market.

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Housing starts stagnated in April, down 0.2% from the prior month, according to the U.S. Commerce Department.

The sentiment appears to be that although this marks the second straight month of dips, most are seeing today’s news as a positive, especially as construction of new homes was expected to fall 2.4% in April.

Further, housing starts are up 14.6% from April of last year, driven primarily by multifamily construction.

But it’s worth not getting overly excited, given that permits dipped 3.2% in April which is a forward-looking indicator, so expect starts to continue cooling in a time where we quite need the inventory.

Demand for housing inventory remains high, but the National Association of Home Builders reports today that confidence in the single-family housing market fell dramatically in May, marking the lowest level in two years.

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors said in a statement, “The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off.”

He notes that as mortgage rates increase, builders “are chasing rising rents, with fewer homebuyers and more renters being forced to renew their leases,” noting that even prior to the interest rate increases, rents were rapidly rising and vacancy rates rapidly declining.

Pointing to another market shift, Dr. Yun notes that “Some degree of a return to the office is also fueling back-to-city living where high rises are concentrated.”

That’s a problem.

“Even as home sales look to trend back to pre-pandemic levels after the big surge of the past two years,” concludes Dr. Yun, “inventory will not return to pre-pandemic conditions. That means home prices will get pushed even higher in the upcoming months, albeit modestly, given the supply-demand imbalance.”

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Real Estate Big Data

Home prices jump double digits in majority of American metros [report]

(REAL ESTATE) Housing affordability was already a widespread challenge before current economic pressures were applied, but now home prices are skyrocketing.

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homeownership home prices

As home sales slide and mortgage rates rise, home prices in 70% of 185 measured metros saw a double digit annual increase in Q1, according to the newest data from the National Association of Realtors (NAR), up from 66% in the previous quarter.

The Southern region accounted for 45% of home sales in Q1, and experienced a 20.1% increase in annual home prices (compared to 14.3% just the quarter prior). Home prices in the Midwest jumped 8.5% annually in Q1, while The Northeast rose 6.7%, and the West increased 5.9%.

The median sales price of a single family existing home has now hit an astonishing $368,200.

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” said NAR Chief Economist, Dr. Lawrence Yun. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

Yun expects supply levels to improve, and for “more pullback in housing demand as mortgage rates take a heavier toll on affordability,” given that “there are no indications that rates will ease anytime soon.”

At first blush, price appreciation sounds lovely to anyone that owns a home, given that it is the largest investment most Americans will ever make.

But regarding today’s report, several homeowners told us that they now feel trapped, and that if they sold their current home, even if they purchased a new house at that same price, they would likely have to downgrade.

Affordability is an ongoing problem weighing down the housing sector. NAR reports that the monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383 (up $319, or 30%, from one year ago). Families now typically spend 18.7% of their income on mortgage payments (but only spent 14.2% one year ago).

“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Dr. Yun observed.

Map of how home prices are behaving nationally

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