Millennials in the Market: The Key to a Faster Recovery?

 

With a population of more than 88 million, the millennial generation has the vastness to truly make an impact on the housing market as buyers, according to a recent study released by Fannie Mae.

However, an underwhelming homeownership demand amongst this age group of mostly 25-34 year-olds has halted the nation’s housing recovery as millennials have a lower likelihood of buying homes compared to other generations.

According to Fannie Mae’s Perspectives blog, the Great Recession serves as the reason behind millennials slow ascent into homeownership. But now that the economy has been recovering for nearly a decade, have millennials begun to increase their homeownership goals?

Analyzing newly released data from the Census Bureau’s American Community Survey (ACS) and using two different change-measurement approaches, authors Patrick Simmons, Director of Strategic Planning at Fannie Mae and Dowell Myers, Professor of Policy, Planning, and Demography at the University of Southern California delve into research to discover how millennials are doing in the housing market.

The first measurement is the “age-group” approach, which compares the cumulative homeownership attainment for different groups of individuals at the same age, but at different points in time.

Utilizing this approach, the data reports no rebound in millennial homeownership rates—even throughout the economic recovery. However, no age group experienced an impactful homeownership rate rise.

There are two ramifications to this resulting data. One is due to the negative outlook this analysis gives potential millennial homebuyers—as it reassures that homeownership demand will continue at a low rate in the future.

The authors note, “After all, if young-adult homeownership rates have yet to rebound after nearly a decade of economic growth, why should we expect a turnaround in the future?”

The second issue is that the results support the idea that millennials seemingly prefer not to pursue homeownership. Additionally supporting the theory that millennial are the vanguards of what the study calls a “renter nation” as homeownership is no longer appealing.

Conversely, the second method called "cohort analysis" separates current from past home-buying behaviors and tracks increments in the homeownership rate for a group of young people as they grow older, advancing from one age group to the next, the report notes.

According to the cohort analysis, the young-adult home purchases accelerated considerably during the economic recovery, starting between 2012 and 2014 at an increase of about 5 percent, and then excelling further through 2016 at about 6 percent—representing a positive outlook for millennial homeownership.

The cohort perspective also casts doubt on what the age group perspective suggests, including millennials preferring to stay away from homeownership.

Forthcoming research from Fannie Mae’s Economic & Strategic Research Group will continue to explore the millennial homeownership rebound.

“This future work should not only help us to better understand the geography of the Millennial homeownership awakening but also hopefully provide some insights into its likely durability in the face of intensifying housing market challenges,” Fannie noted.

To view the full report, click here.