The prime buying age for a first home happens around the mid-thirties......and right now Millennials are on average hitting this sweet-spot age where cocooning and nesting - and buying a first home - become a priority.
Millennials have been doing things a bit later in life compared to past generations, hence a bit of a delay in this demand. (Life expectancy is also expanding in none-rural areas.)
But is the first-time housing inventory catering to this demand?
In some areas yes, but in most the answer is no.
Today's first-time home buyer is different to past generations.
1. Under-building over the past decade combined with low interest rates, has caused pricing to soar in many areas and income growth has not kept up. This is especially true in larger cities where many of the jobs are located.
2. Many of today's first-time buyers who CAN afford to buy want brand newly built or renovated homes. Their eyes have become accustomed to high design via intense media focus over the past decade. They are also working long hours to earn what it takes to afford a home and don't have the time - or want to spend their free time - fixing up a home.
3. Renovation is also difficult when you need to have larger down payments because of tougher lending standards that leave little or no cash for renovation work.
4. Today's first time home buyer often has lots of student debt that impacts their borrowing capacity.
5. Today's first-time buyer is being lured into renting more aggressively than ever. The promise of freedom and flexibility is attractive. Landlords have done the most amazing job convincing first-time buyers that renting is cheaper than owning.
6. Today's first-time buyer has not yet inherited wealth from their parents who are probably in their mid-60's to early 70's, although the massive transfer of wealth - especially prior to death - has already begun. This may be the ultimate fuel for first-time buyers in more expensive locations.
7. While the average income of a Millennial makes it tough to afford to buy a home, let us not under-estimate a segment of this demographic that is already earning very well and escalating in their careers.
8. Affordability will be the driving topic over the next few years as it relates to housing.
If just 10% of this Millennial demographic (around 80 million people) can afford to buy a home.....that is 8 MILLION homes.
Less than 3 million Americans die each year.
The US has averaged building under a million homes per year over the past decade.
The future of housing is bright.....if we build and deliver more of what the market is in need of.