Millennial SlowdownHomeownership was crawling slowly back from its record low two years ago, but it just stalled, and the youngest homebuyers are behind that. Millennials had been driving the nation’s overall homeownership rate, showing the biggest gains throughout 2017, but they dropped back in the first quarter of this year. Millennials are hitting some major roadblocks on their way to homeownership these days, causing this bulky buying power to lose some steam given needs gone unmet within current market conditions. As inventory levels across the board continue to cinch at the minimum, certain markets are particularly volatile for millennials based on hiking home prices due to short supply. According to a recent report from CNBC, “The culprit is pretty clear: weakening affordability. Home prices have jumped dramatically in the past year, and the gains accelerated in the first quarter of this year, as the supply of homes for sale continued to drop to record lows. Mortgage interest rates also surged at the start of this year to the highest level in four years.” In more ways than one, options are becoming more limited as millennials edge away from those areas where the odds are clearly against them. On this, CNBC reveals, “Low supply and high demand are pushing prices higher everywhere, but the situation varies slightly city to city. No surprise, San Jose, California, and Seattle are the toughest housing markets for millennials,” along with some other areas less foreseeable. And on a broader spectrum, millennials aren’t the only homebuyers caught in the crossfire of cutthroat competition that can be nothing short of exhausting when on the home hunt. Real estate agents across the nation are on high alert when it comes to assisting their clients in the aggressive game to win at homeownership, especially when stakes are high. Philadelphia agent, Patrick Clark, notes, “The frustration with the lack of inventory is, so many of the houses are going into bidding wars, and so you know you really have to step up to the plate and you have to do your homework to be a competitive buyer.” And perhaps this does not ring truer than for millennials because of their affordability needs and tendency to gear toward starter home purchases that fall within an attainable price range. According to the National Association of Realtors, “The supply of starter homes is so lean that March sales were down in that sector over 21 percent compared with a year ago,” as cited by CNBC. But despite having to wade through murky market conditions, millennial resilience is noteworthy. Cheryl Young, senior economist for Trulia, speaks to this stating, “Millennials have emerged as the most dogged homebuyers with those under 35 far outpacing the overall annual homeownership rate change, despite contending with the most vexing portion of the housing market. Millennials make up the largest share of those seeking starter homes, a portion of the market that saw inventory plummet 14.2% and prices leap nearly 10% year-over-year in Q1 2017.” With millennials still in a power position as buyers, all are left to hope that supply begins to better meet demand. Sound of SpringHome prices have been rising steadily since the recession, but the gains are suddenly accelerating as spring demand heats up in an already highly lean and competitive market. Prices surged 7 percent higher in March compared with a year ago, according to CoreLogic. That’s the biggest gain since May 2014. Housing players are singing the same old tune of high prices and low inventory marching through the spring selling season, but none expected the rise to high notes that home prices are hitting, ending in a crescendo of overvalued markets and bidding wars on stage. CoreLogic chief economist, Frank Nothaft, explains, “High demand and limited supply have pushed home prices above where they were in early 2006. New construction still lags behind historically normal levels, keeping upward pressure on prices.” Results of this offbeat melody are slowing down the rhythm of the market altogether, driving affordability down, especially in the low-end markets where skimpy levels plague supply. Some experts like Frank Martell, CoreLogic CEO and president, suggest that most of the crowd is falling behind the beat as, “Affordability continues to slip away from the average buyer. Lower-priced homes are appreciating much faster than higher-priced properties, making the affordability crisis even worse.” On this note, CNBC reports, “Prices are seeing the biggest gains at the lower end of the market, where supply is leanest,” and similarly, according to the National Association of Realtors, “Sales of homes priced under $100,000 fell more than 20 percent in March, not because there wasn’t demand, but because there wasn’t enough supply.” All the while, this disheveled dance is causing buyers to have to fight for their chance in the housing spotlight. With these heated conditions, common buyers are entering bidding wars more than ever before which ignites rates, further thwarting market tempo. A recent report from CNBC explains, “Higher mortgage rates usually mean cool home prices, as buyers can’t afford as much and sellers have to accommodate. The difference in today’s market is that there is so much pent-up demand from the largest generation, and the economy and employment are improving.” In fact, there’s a clear connection between economic growth and surging home prices as Nothaft points out, “All of the cities and states where prices are rising the most are seeing strong job growth.” Nationally, the housing anthem is loud and clear, but certain areas are almost being drowned out by the blare of affordability pressures including the alluring states of California, Washington, and Colorado, to name a few. California is being particularly affected as other areas with comparable luxuries are luring people in, enticed by lower costs of living. CNBC cites, “There is new data showing people are now leaving California due to sky-high home prices,” while Realtor.com agrees reporting, “16 of California’s most popular counties are losing residents.” In turn, other less predictable areas such as, “Utah and Idaho are seeing double-digit gains, as workers move to areas where there is more supply,” according to CNBC’s report. As the springtime song plays on, buyers are hoping for the end of a tune stuck on repeat. |