theMReport.com Your trusted source for mortgage banking news
Millennials are leaning toward single-family homes when browsing the housing market. A recent analysis from Fannie Mae titled “Rent or Own, Young Adults Still Prefer Single-Family Homes” determined that householders aged 25-34 were more likely to occupy a single-family home in 2013 than in 2006, during the peak of the last housing cycle.
“As the housing recovery plods along, many are looking to young adults as a source of new demand that could invigorate the residential rebound,” Patrick Simmons, director of strategic planning economic & strategic research group at Fannie Mae. “Interest in the housing behaviors of young adults is intensified by the sheer size of the millennial generation, which by some estimates is the largest in U.S. history. In particular, much attention has focused on millennials’ household formation and homeownership rates, which are substantially lower than for previous generations.”
The research examined the rates at which young households occupy single-family homes across the rental, owner-occupied, and recent homebuyer markets and also compared the structure-type choices of young households today with those of young adults prior to the housing crash, according to Fannie Mae.
The analysis found that although occupants aged 25-34 were less likely to dwell in a single-family home in 2013 compared to 2006, the likelihood that a young adult will live in a single-family home today does not differ from 2000, before the housing boom and bust.
The research also determined that 25-34 year-old homeowners are found to be more likely to reside in a single-family home today than previous generations, and young renters today are roughly as likely to occupy a single-family home as the preceding generation when structure-type occupancy rates are disaggregated by housing tenure. Exceeding the rate at which young adults bought single-family homes during the housing boom, 90 percent of 25-34 year-olds who purchased a home between 2012 and 2013.
“Millennials have become an increasingly important source of demand in the home sales market,” the report said. “Recent studies indicate not only that Millennials have become the dominant demographic in the sales market, but they also find that the large majority of Millennials are purchasing single-family homes.”
Fannie Mae believes that the rising popularity of single-family homes came after the housing bust and tightened credit standards shifted the distribution of homebuyers toward more affluent households. The proportion of recent homebuyers aged 25-34 who resided in single-family homes in 2013 was 2.3 percentage points greater than in 2006 and five percentage points higher than in 2000.
Single-family homes make up 90 percent of the nations owner-occupied housing stock, making it a popular choice for young homebuyers, Fannie Mae reported. The proportion of 25-34 year-old homeowners who resided in a single-family home in 2013 was 1.5 percentage points greater than in 2006 and 4.4 percentage points more than in 2000.
“A sharp rebound in multifamily construction, but only modest gains in single-family homebuilding, have characterized the housing market recovery,” the report said. “However, the continued popularity of single-family housing among today’s young adults should give pause to those who argue that a fundamental generational shift has occurred in housing-type preferences. Millennials’ desire for single-family homes not only remains robust, but should strengthen in coming years as more members of the cohort age into their thirties, prime years for first-time homeownership. Given the massive size of the millennial generation, this life-cycle progression should support continued recovery in housing construction and bodes well for a stronger rebound in the single-family sector in the second half of the decade.”
