If Millennials can’t afford houses, are developers out of luck?
7/3/2015 | Real Estate Blog
Real estate developers, homebuilders and realtors have had a pretty rough decade, and new potential problems seem always to be on the horizon. The foreclosure crisis sent new housing starts plummeting — and the apartment industry booming. Climate change threatens to alter entire coastlines — or at least to create new design and insurance challenges. Now, an entire generation of Americans may have given up on homeownership.
According to the National Association of Realtors, the number of first-time homebuyers in the market is dropping. Outside of boom and bust cycles, the group says that first-timers traditionally made up about 40 percent of homebuyers, but after the housing bust that percentage dropped to 33. Since first-time homebuyers are typically young adults, it seems our current crop — the Millennial generation — is buying substantially fewer homes.
A recent Allstate/National Journal Heartland Monitor poll sought to determine whether Millennials have fundamentally changed their views. Did the housing bust put them off homeownership altogether?
Millennials see the value in homeownership but weigh costs and benefits
The good news is that both Millennials and older respondents said they still believe in the value of homeownership. Only about 12 percent said buying a home is a risky proposition or a bad choice. Unfortunately, nearly 20 percent of younger respondents said homeownership simply isn’t financially viable for them.
In May, a Credit.com survey found that Millennials are focused on freeing themselves from debt rather than building home equity.
“Every day that I see the debt I owe, it hurts my head and feels like an actual weight on my shoulders,” one Millennial told MainStreet. “The idea of not owning anything to anyone is incredibly liberating.”
The economic downturn hit Millennials hard — and so have student loans. Debt and poor economic prospects may even be causing Millennials to put off marriage and children — bit motivators for homeownership.
“Owning a house still sounds great,” the Millennial added. “It’s just that nobody my age has the money to do such a thing, and it makes no sense, because people in their 20s don’t have three kids like they used to.”
So what’s a developer to do? Now is the time to evaluate your prospects — or perhaps even your product. If you’re relying on first-time homeowners to buy in, you may have some selling to do.