We never thought the day would come: millennials are finally starting to move out of mom and dad’s basement and are now actually powering the unexpected rebound in the housing market. Well, OK, millennials and the Fed, who is providing them with their down payments in the form of PPP loans.
Regardless, housing demand from millennials made up 38% of home buyers for the year ending June 2019. This is up from 32% in 2015, according to the Wall Street Journal and the National Association of Realtors. They also accounted for more than half of all new home loans early last year and they “consistently held above that level in the first months of this year.”
Millennials also passed baby boomers as the biggest living adult generation in the U.S. last year. Soon, a majority of those millennials, born in the 90s, will enter into their 30s. Odeta Kushi, deputy chief economist at First American Financial Corp., said: “We anticipate as they turn 31 and 32, we’ll just see homebuying demand grow.”
The data flies in the face of assumptions that millennials would forever be renters. However, it may not be the beacon of economic good news that many believe. The WSJ makes it seem as though millennials are no longer hampered by student debt and broke – but the assumption they have built nest eggs somehow likely belies the real mechanics of millennials becoming home owners: free government money and rigged 0% interest rates.
For example, 32 year old Sandra Martinez-Gonzalez told the WSJ that “when she started looking for a new place to rent at the beginning of the year, she realized buying would be cheaper than renting in her neighborhood”.
Of course, the entire generation moving closer to home-buying age also helps. Rick Arvielo, chief executive of mortgage lender New American Funding asserts: “Millennials, they’re roaring into homebuying age. What the industry’s been talking about for a decade is whether they’re going to follow their predecessor generations in terms of their desire to own homes. Yeah, they do—they have the same desires.”
Sales of previously owned homes were up almost 25% in July – the highest SAAR since December 2006. Additionally, first time buyers made up 34% of all sales in July. This is up from 32% a year prior.
Home buying is also being attributed to many of the younger generation moving out of cities – as a product of not only the coronavirus pandemic, but now the growing unrest in major cities across the nation. But while housing prices soar and demand is steady, a reality check may still loom as a result of the collapsing underlying economy.
But, for now at least, it is once again Fed-induced sunshine and rainbows. Martinez-Gonzalez concluded: “It feels amazing. Now that we have a home it kind of feels like: Why didn’t we do this sooner?”