The Economist March 26th-April 1st 2022, pp72 |Finance&economics|House prices|”Coming of age” “Millennials are stoking the property boom-at last”
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Summary by 2244
Until recently, a number of factors have kept millennials out of the home-buying market. They have been “putting off marriage, delaying parenthood and battling student debt.” But in 2020 they accounted for “60% of property-sales growth.” In the next two years “more millennials will reach the age of 32, the median age for first-time buyers…than ever before.” To meet demand American builders must add “2m houses each year” up from 1.6m in 2021.
Another factor driving demand are the workplace changes brought on by the pandemic With more work-from-home, “a growing number of millennials want larger family homes with more dedicated office space for remote work.” The pandemic may have also moved-up the millennial-generation’s home-buying timeline as more time was spent at home. With remote work, buyers have considered small cities that are often more affordable and offer more spacious homes when compared to the larger cities. Hotspots have been Phoenix, Tampa and Austin. According to Zillow, “a typical renter in San Francisco would have to set aside 2.4% of their income for six or seven years to save enough for a 20% deposit on a starter home in Austin or Phoenix” as compared to 70 years for San Francisco.
These demographic trends should continue to keep the demand high but with a constrained supply “the dream of home ownership may still prove out of reach” for many millennials. Even the impending rise in interest rates, from historic lows, is unlikely to offset the mismatch between supply and demand. Price pressure will also continue as the cost of materials, land and labor are rising.