Are Millennials Finally Reentering the Housing Market?
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Despite dire recent reports about the withdrawal of first-time buyers from the housing market, some indicators are pointing to a belated uptick among the millennial population. The nationwide brokerage Redfin recently told The Real Deal that 57% of the tours hosted by its agents this month were given to first-timers. That's a dramatic 27% jump from January 2014 and the best rate in several years.
And a poll by Campbell/Inside Mortgage Finance HousingPulse of 2K agents across the country reported a surge in first-time buyer activity, saying they made 36.3% of purchases last month. Millennials, broadly considered to be those born between 1981 and 2000, make up 17% of the population according to MarketWatch. And while recent data from the National Association of Realtors showed first-time buyers making a meager 33% of buys—the lowest rate since 1987—recent government action may be taking hold among the younger set.
Specifically, last month's federal announcement that Fannie and Freddie would offer mortgages with down payments as low as 3% could be a major boon to buyers struggling with student debt and sluggish wage growth. The typical 20% down payment was a hindrance to new homebuyers, and while some say the drastic easing recalls predatory lending practices, such action may be needed to get first-timers back to their historical 40% share of buyers.
But a big question mark that transcends economic intervention involves demographic shifts toward later marriage (or skipping it altogether) and urban apartment living (often in rentals) that has kept traditional "household formation" at 500K a year, which is just half the number considered vital to a strong housing market.