Millennials are expected to drive the housing market this year, usurping baby boomers as the most dominant force in real estate. However, it seems the nationwide housing shortage has blunted their projected impact, according to research from ATTOM Data Solutions covered in HousingWire.
Analysts at the firm believe three variables are keeping inventory low and hurting younger buyers poised to put down roots.
Key inventory challenges
First off, ownership tenures have increased significantly from just over four years in 2007 to almost eight. Of course, this trend leads to fewer listings and makes the house hunt more difficult.
Secondly, refinancing rates have risen. This means many owners swapped out their original mortgage agreements for newer ones with lower interest rates. Consequently, many are reluctant to leave these financial accords behind and start anew, especially as current rates rise.
Lastly, ATTOM found that investors are buying up a large percentage of starter homes, leaving millennial house hunters with few affordable options. Some investment firms allocate as much as 50 percent of their total portfolios to real estate assets.
With these inventory trends in play, many millennial buyers are struggling to find a foothold in the market.
Hope on the horizon
Home builders can solve the problem, The Washington Post reported. Since the recession in 2008, construction levels have remained depressed due to labor shortages and regulatory factors. These firms have ramped up their efforts in recent years but more action is needed to give millennial homebuyers a chance.
"The challenge is really adding inventory at the entry-level space," Robert Dietz, chief economist for the National Association of Home Builders, told the newspaper. "Can builders do that at a cost that meets buyers' expectations, given rising land development costs, rising wages and rising land costs?"
Currently, most firms cater to moneyed builders. Single-family home starts are down as a result, according to the Department of Commerce. Authorizations for these projects decreased almost 3 percent in January. Analysts and young buyers hope things move in a different direction over the coming months.
The good news is overall inventory rose in January, signaling that these issues could be resolved just in time for spring, the optimal sales season. Hopefully by then, millennials can get out in full force and meet homebuying expectations.
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