Home asking prices saw a "surprisingly large" increase in November—creating further problems for millennials who already can't afford a home in their own market.
Asking prices on for-sale homes [1] jumped 1.5 percent month-over-month in November, outpacing a pre-revised increase of 1.0 percent in October, according to property data firm Trulia [2]. Annually, prices were up 7.4 percent, down from a 10.3 percent increase last year but up from a gain of 6.4 percent the month prior.
"Future months will tell whether this was a blip or the beginning of a sustained climb," said Trulia Chief Economist Jed Kolko.
Examining local market data, Trulia found increases were largely split along age lines, with asking prices rising faster in metros predominantly populated by Gen X, baby boomers, and senior Americans compared to those occupied by more millennials.
To illustrate the point, Kolko pointed to the top 10 markets for annual asking price growth, four of which are in the boomer-friendly state of Florida: Palm Bay-Melbourne-Titusville (where prices were up 15.2 percent in November), North Port-Bradenton-Sarasota (14.7 percent), Cape Coral-Fort Myers (13.3 percent), and Lakeland-Winter Haven (13.0 percent). Baby boomers account for at least a quarter of the population in each of those markets, while millennials make up about 15 percent or less.
The trend was the same for the other older groups: Markets with the highest shares of Gen Xers averaged annual asking price increases of 9.4 percent, while senior markets averaged gains of 8.6 percent—compared to just 6.1 percent for Gen Y-dominated markets.
While slower price increases might be a benefit for millennials hoping to buy, "affordability is nonetheless a big challenge in those markets," Kolko said.
Comparing the millennial population share in each of the country's largest metros with the percentage of for-sale homes a typical millennial household could afford, Trulia found markets with higher millennial shares also happen to be markets where homeownership is less affordable for that group.
Using popular millennial markets like Austin, Honolulu, New York, and San Diego as an example, the company estimates fewer than 30 percent of homes for sale are within reach of the typical Gen Y household.
"Call it the 'millennial mismatch.' Millennials can afford markets where they don't live, but they can't afford many of the markets where they do live," Kolko said.
Making matters worse, rental costs continue to see gains on par with homeownership costs, rising 6.1 percent over the year in November. With rents continuing to soar, recent reports show the cost of owning a home remains only about half that of renting [3]. That might be cold comfort, however, for renters who are unable to save for a down payment [4].