As you may recall, the housing market was on fire for most of 2018. Inventory was low, prices were high, and it was truly a “seller’s market.” Many factors were responsible for this trend, and low interest rates is arguably the most significant one that prompted buyers to seek a new home. Then, around June, interest rates went up, price increases went on the decline and the market overall stumbled down the stretch.
Fast forward to the present day. Housing trends have begun to shift, and home price growth is still slowing down – a trend that many think will continue deep into the year. This means that unlike the past several years, which were considered seller’s markets, 2019 is shaping up to be a buyer’s market. And it’s the millennial generation that largely holds the key to shaking things up now and in the future.
Buyer’s Market Defined
What’s a “buyer’s market”, you ask? It’s essentially the opposite of a seller’s market, describing a time in the real estate industry where inventory is plentiful and prices are low. It’s the basic concept of supply and demand: When inventory is there, there’s less demand and prices will be low. Conversely, when inventory is scarce, there’s a greater demand, thereby inflating prices. The real estate market in 2019 is expected to have lots of inventory, and for this reason, buyers are at an advantage.
Millennials and the Housing Market
While many decry the millennial generation, we’d all be better off embracing and marketing to them. For example, to date, many real estate analysts have bemoaned the lack of activity in the housing market from this generation. Why not spend the effort spent slamming millennials and turn it into helping them purchase that first home? Now could be the right time, especially among older millennials.
There are many reasons why millennials didn’t jump right into home ownership. Many, for instance, are saddled with student loan debt. Others would rather live with the flexibility of an apartment lease as they get their young career started and ponder relocation opportunities for work. Additionally, instead of saving for a home, many millennials have allocated disposal income into travel, vacations and “experiences” versus property.
But now, with home prices low and plenty of inventory on the market, it could be the perfect time for millennials to make their first home purchase. This is especially true, as we said before, of the older millennials, who may not be so tied down by student loans and other debt as they cut their teeth professionally.
Currently, millennials only make up about 32 percent of the national housing market, but that could soon be changing. For starters, the baby boomer generation is now looking to sell or downsize their living accommodations, a factor that’s helping to increase inventory. Secondly, interest rates – though not as low as they once were – are still very favorable. Considering that the Federal Reserve is only expected to hike these rates throughout the year and subsequent years, buying now would help lock in a rate that is likely only to rise and make big purchases – like a home – more unattainable. Last, but not least, the economy is still on the upswing, as evidenced by wage growth. Certainly, young professionals are reaping the benefits of all of this, likely making for more income and thereby more opportunity.
The bottom line is that millennials are expected to become the largest generation by population in 2019. Currently, the number of U.S. millennials sits at 71 million. Only the baby boomer generation is greater, but that is soon to be changing. If the housing market wants to rebound, then it’s going to have to appeal to a demographic of U.S. citizens that have largely been absent from it to date. If not this year, then in the coming years.
Regards,
Ethan Warrick
Editor
Wealth Authority
